ALGIERS/TUNIS - Residents of the rebel-held Libyan city of Misrata said government snipers were shooting people from rooftops on Saturday and the hospital could not operate on the wounded because it had no anaesthetic.

Misrata, about 200 km (130) miles east of Tripoli, is the last big rebel stronghold in the west of the country and people living there say forces loyal to Libyan leader Muammar Gadhafi are still trying to retake the city despite a ceasefire.

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Local people said there was some shelling in the city on Saturday morning -- though not as heavy as the previous day -- and that the city was facing a humanitarian crisis because water supplies were cut for a third day.

"I am telling you, we are scared and we are alone," a Misrata resident called Saadoun told Reuters by telephone.

"We have two people dead this morning, not because of the shelling but because there are snipers on some houses and they are shooting people, they are shooting whoever they see."

"This morning there was some shelling from two tanks and it stopped but the destruction from yesterday's bombardment is huge. Destruction every where. Mosques and houses; nothing was spared," Saadoun said.

"We are all scared here, the people of Misrata are scared. We feel a humanitarian crisis is coming...(there is) no water for more than three days and no electricity."

Reports from Misrata could not be verified independently because authorities in Tripoli have prevented journalists from reaching the city.

Libyan government officials deny attacking rebels and say they are observing a ceasefire.

"They (Gadhafi's forces) bombed the town with four or five artillery shells in the early hours today. The situation is relatively calm now. But they are still on the outskirts of the town," another resident called Mohammed told Reuters.

Medcine shortage

One man, who spoke to Reuters via Skype because telephone lines were not working properly, said seven people killed in Saturday's shelling had been brought to Misrata's hospital.

"We cannot tolerate (it) any more. Our hospital is in severe shortage: no medicine, no anasthesia drug, the hospital is over-crowded, we cannot operate any more," he said in English.

People in Misrata, Libya's third-biggest city, joined in a revolt against Gadhafi's rule over a month ago.

But the city is cut off from the main anti-Gadhafi stronghold in the east of Libya and since the revolt government forces have encircled the city. In the past few days they have been using artillery and tanks to try to retake it.

Saadoun described a city that has been devastated by the shelling and where people are struggling to stay alive.

"We have only one plant working and it doesn't feed the whole city so a big part of the city is without electricity. All communications are down," he said.