Troops loyal to Libyan leader Muammar Gaddafi are shelling the rebel-held city of Ajdabiya, a strategic eastern town that has been the scene of intense fighting in recent weeks.

The government bombardment of Ajdabiya today marks a setback for the rebels, coming a day after rebel forces battled Gaddafi's troops on the outskirts of the oil town of Brega, about 60 miles to the west.

Dozens of vehicles, some of them rebel trucks with heavy machine guns mounted in the back, could be seen fleeing Ajdabiya north toward the rebel stronghold of Benghazi.

Earlier Gaddafi's forces pounded Misrata - the only western city still in rebel hands - with rocket fire as residents who have endured more than a month of fighting lashed out at Nato for failing to halt the deadly assault.

Five civilians were killed in a 30-minute post-dawn barrage of shelling yesterday that heavily damaged a factory for dairy products and sent up a thick column of black smoke, a doctor said.

A human rights group has accused the Gaddafi regime of using cluster bombs in Misrata - munitions that can cause indiscriminate casualties and have been banned by most countries. The Libyan government and military denied the claim.

Mohammed Idris, a hospital supervisor in Ajdabiya, said: "We have not seen any protection of civilians. Nato air strikes are not enough and the proof is that there are civilians killed every day here."

The theme was echoed in the rebel stronghold of Benghazi, where spokesman Abdel-Hafidh Ghoga told a news conference: "There's no more room for hesitation or for not standing with determination against what is happening in Misrata and other Libyan cities, because the destruction that Muammar Gaddafi is causing in Libyan cities is great and extensive."

Rebels in Misrata and the New York-based group Human Rights Watch have alleged that Gaddafi's forces have been using cluster bombs, which pose particular risk to civilians because they scatter small bomblets over a wide area. Most of the world's nations have banned the use of the munitions.

Human Rights Watch said its researchers inspected remnants of the weapons found in a Misrata neighbourhood and interviewed witnesses.