US President Barack Obama has said he does not rule out arming the rebels seeking to overthrow Libyan leader Colonel Muammar Gaddafi.
He said in an interview that Col Gaddafi had been greatly weakened and would ultimately step down.
Pro-Gaddafi forces have driven the rebels back tens of kilometres over ground they took in recent days after coalition air strikes.
The rebels have now retreated eastwards past the town of Ras Lanuf.
News of the rebel withdrawal came as an international conference on Libya in London agreed to set up a contact group involving Arab governments to co-ordinate help for a post-Gaddafi Libya.
At least several thousand people have been killed and thousands wounded since the uprising against Col Gaddafi's rule began more than six weeks ago, with the rebels now controlling much of the east and pro-Gaddafi forces holding the capital Tripoli and other western cities.
'Not envisaged'
Asked by US media if he supported arming the rebels, President Obama said: "I'm not ruling it out but I'm also not ruling it in."
He confirmed America would supply assistance to opponents of Col Gaddafi in the form of humanitarian aid, medical supplies and communications equipment.
Mr Obama emphasised that the Libyan campaign did not foreshadow military action in Syria or other countries where protests have been violently put down.
He said Libya presented a "unique circumstance" in which a coalition had come together under a UN mandate to "save a lot of lives", and he added that America's military was already overstretched.
French Foreign Minister Alain Juppe said at the London conference that France and its partners were prepared to discuss arming the rebels but not without the backing of a new UN Security Council resolution.
"I remind you that this is not what is envisaged by Resolution 1973... so for the moment France has agreed to the strict application of these resolutions," he said.
However, US Secretary of State Hillary Clinton told the conference that although UN sanctions prohibited the delivery of arms to Libya, the ban no longer applied.
"It is our interpretation that [UN Security Council resolution] 1973 amended or overrode the absolute prohibition on arms to anyone in Libya," she said.
UK Foreign Secretary William Hague told the BBC that Britain was not planning to give military assistance to rebels "in any form... at the moment".
"Our focus is on trying to protect those civilian areas with the measures that we've been carrying out the last ten days," he added.
Rebel retreat
Forces loyal to Col Gaddafi launched a new offensive on Monday, consolidating their hold on western Libya.
Hundreds of rebels fled in panic from the recently captured town of Bin Jawad and there were also reports of further shelling in the city of Misrata, which government forces are battling to seize back.
The BBC's Nick Springate reports from eastern Libya that the country has seen an incredible reverse for the rebels.
Their retreat is very significant as it shows they have lost the momentum gained after coalition attacks which allowed them to take the towns of Ajdabiya, Brega and Ras Lanuf, our correspondent says.
It also shows the rebels lack supply lines and organisation, he adds.
In the capital, Tripoli, several large explosions were heard close to the Libyan leader's residence.
A senior official close to Col Gaddafi told the BBC that he believed the Libyan government could accept the partition of the country and the division of its oil revenues.
