LONDON - Britain set up a covert unit in London to block oil supplies to Muammar Gaddafi and ensure the rebels received enough fuel for their fight against the Libyan dictator, a diplomatic source said yesterday.

The "Libyan oil cell" comprised a handful of civil servants, ministers and military figures working secretly from the Foreign Office in central London.

The unit was the brainchild of Alan Duncan, a minister in the Department for International Development, who convinced Prime Minister David Cameron that part of the solution to the conflict lay in oil, reports said.

The six-strong team was set up in April and worked from two disused rooms on the top floor of the Foreign Office, where officials gathered information about oil and fuel movements and passed it on to the government and Nato.

Oil was targeted as it was "an important part of Gaddafi military machine", said a British diplomatic source.

Key initiatives included helping with the blockade of Gaddafi ports by passing advice to Nato and helping locate routes that smugglers were using to get fuel into Libya overland, it was reported.

The unit also provided intelligence to the rebels to cut off the supply of crude oil from the Nafusa mountains to Gaddafi's refinery at the port of Zawiya.

Smugglers were trying to transport oil on land routes after the European Union froze the assets of nearly 50 entities, including six ports in Libya to put pressure on Gaddafi.

London-based oil traders were encouraged to sell fuel to the rebels in the rebel stronghold of Benghazi and were put in contact with the rebel leadership.

British media reported that Duncan once worked for Vitol, the oil trading group that provided fuel to the rebels.