A U.S. envoy arrived Tuesday in the rebel stronghold of Benghazi to begin talks on possible financial help to the Libyan opposition amid reports of fresh setbacks for anti-government forces in the key port city of Brega.

Chris Stevens, a former U.S. Embassy official in Tripoli and the highest-ranking U.S. representative to travel to Libya since the uprising began, will explore ways to open the funding spigots for an opposition movement that is desperately short of cash and supplies, a State Department spokesman said Tuesday.

“We’re well aware that there’s an urgency,” spokesman Mark Toner told reporters. “The Transitional National Council does need funding if it’s to survive, and we’re looking for ways to assist them.”

But Stevens, who was expected to remain in Benghazi for several days, brought no fresh promises of political or military support from Washington, which has declined so far to either arm the rebels or grant symbolically important diplomatic recognition. Italy joined France and Qatar on Monday as the first states to formally recognize the Transitional National Council as the legitimate government of Libya, with Kuwait and several other countries considering similar moves.

The visit came amid news of a rebel retreat from Brega, a hub for oil exports and the scene of see-saw battles over the past two weeks. Rebel fighters were pushed back under heavy rocket and artillery file, the Associated Press reported, as momentum appeared to shift again, this time in favor of loyalist troops dug in around the town.

Forces loyal to Libyan leader Moammar Gaddafi continued to pound the besieged town of Misurata, killing a 10-year-old child and a radiology technician at the local hospital, according to a doctor at the hospital who spoke on the condition of anonymity out of concern for his family’s safety. Though NATO planes were heard flying overhead, there have been few airstrikes against Gaddafi positions, leaving people in the town feeling abandoned and betrayed, he said. “Instead of a no-fly zone we have a no-safe zone,” he said.

Despite the apparent losses in Brega, opposition leaders say they are preparing to begin exporting crude oil to raise money for the transitional council. A large oil tanker steamed into Tobruk in rebel-held eastern Libyan to take on an estimated 1 million barrels of crude, Bloomberg News reported.

The rebel group has struggled to raise money since the start of the uprising, lacking the means to sell oil and failing so far to find enough foreign funders and donors. Billions of dollars in Libyan cash sits in European and U.S. banks, frozen by U.N. sanctions and out of reach, for now. Toner, the State Department spokesman, said U.S. Treasury officials were exploring ways to free up the money for the opposition, even as it continues to evaluate the rebels.

“We’ve been proceeding cautiously, working to establish contacts not only with the TNC but with a number of other opposition leaders as this opposition government evolves,” Toner said. He confirmed that there had been no decision on granting diplomatic recognition or providing military aid or training to rebel groups.

The spokesman also declined to endorse any of several apparent peace overtures floated in recent days by both the rebels and aides close to Gaddafi. A plan attributed to Gaddafi’s second-oldest son, Saif al-Islam, proposed a possible peace deal in which Gaddafi would step down as leader while Saif would serve as a transitional figure until a new Libyan government was formed.

“There’s a lot of plans being bandied about,” Toner said. “What’s clear is that it’s really up to the Libyan people and the Libyan opposition to decide how this looks. “

In Tripoli, Libyan deputy foreign minister Khaled Kaim said Libya was open to “any political solution,” and said the government would be prepared to consider political reforms or elections if the rebels laid down their arms.

But he also dismissed the possibility of negotiations with the Transitional National Council, saying the rebel government amounted to little more than an “armed militia” that had been infiltrated by al-Qaeda and was supported by a minority of Libyans.

Acting Libyan Foreign Minister Abdul Ati al-Obeidi arrived in Turkey for talks with its government, just a day after he delivered a message from Gaddafi to Greek Prime Minister George Papandreou in Athens.

Turkey and Greece, both NATO members, have said that they want to listen to proposals from both sides on a way to end the violence. Greek Foreign Minister Dimitris Droutsas said after meeting with Obeidi that “there is mobility, and there is a chance, albeit small, for a politico-diplomatic solution.”

Sly reported from Tripoli. Special correspondent Karla Adam in London and staff researcher Julie Tate in Washington contributed to this report.