TRIPOLI, Libya – Libyan rebels cleared one of Moammar Gadhafi’s last major strongholds in the capital Thursday evening after a prolonged and fierce gun battle that left houses in flames and bullet-riddled bodies in the streets. But they found no sign of their greatest prize, their former leader himself.

Even as rebels swept through and took control of the loyalist Abu Salim neighborhood, Gadhafi, ever defiant, taunted them in an audio message from his secret hideout. He said NATO was on the retreat and appealed to his supporters to march on Tripoli and “purify it” of the rebels, whom he called “rats, crusaders and unbelievers.”

Small pockets of resistance remain and loyalist snipers still occupy isolated buildings. But butchers, bakers and grocery stores in the city started to reopen Thursday as supplies trickled in from Tunisia, and a few people ventured out to buy food on streets still strewn with trash, even as explosions and gunfire echoed across the city.

Water remains cut off in many neighborhoods, and gunmen still dominate the streets, some of them just teenagers manning improvised checkpoints every few yards with rifles slung over their shoulders. Graffiti has been scrawled on almost every available wall proclaiming that God is great, that Gadhafi is a dog and that the revolution that began on Feb. 17 has finally won the day.

If the rebels are finding Gadhafi elusive, their search for the funds they need to build a viable state made considerable progress, with the U.N. Security Council agreeing Thursday to release $1.5 billion in frozen Libyan assets held by U.S. financial institutions to fund humanitarian operations and buy fuel, food and other basic goods.

In Tripoli, the resistance in Abu Salim was so fierce that rebels suspected they might have stumbled on the last hiding place of Gadhafi or one of his sons. They hammered buildings with anti-aircraft fire and left streams of blood running down the streets. Huge explosions and palls of smoke rent the air, mixing at one point with the Muslim call to prayer.

At one point, six trucks of rebels from the coastal city of Misrata arrived to take out the snipers in an apartment complex, but instead got preoccupied with removing a gigantic poster of Gadhafi in a general’s uniform hanging on the side of a building nearby.

“We are here to deal with the snipers,” said their commander, Nouri Sherkisi. But instead, his men started filling gasoline bombs to throw at the poster. Just as they were getting ready to burn it, gunfire crackled from all directions and the rebels fled in their vehicles.

As the fighters tried to purge the capital of the last remnants of Gadhafi forces, the city still had a chaotic air.

Heavy firing erupted just outside the Corinthia Hotel, where many foreign reporters are staying. Rebels fired their guns indiscriminately at imaginary targets as reporters scattered for cover, and one man even turned his Kalashnikov on the hotel itself, sending masonry crashing to the ground as he aimed at one of his own fighters positioned on a rooftop.

As talk swirled of snipers, rebels concluded that the whole incident was just a case of confused “friendly fire.”

Although rebels have seized control of Tripoli’s main airport, Gadhafi’s troops still control territory on the airport road and are using it to shell the airfield. One civilian plane was hit by a rocket and destroyed this week.

Elsewhere in the country, rebels were trying to advance on the coastal city of Sirte, Gadhafi’s hometown and tribal power center, which lies roughly halfway between Tripoli and Benghazi, the de facto rebel capital.

One group of rebels, backed by NATO warplanes, has advanced eastward along the coast from Misrata, while another group, attacking from Benghazi, said their advance has been stalled at the oil refinery at Ras Lanuf, around 130 miles east of Sirte.

Talks with tribal leaders in the city have been continuing for at least two days without progress.

One of the rebels’ top field commanders in the east, Fawzi Bukatif, said they were trying to negotiate a truce and safe passage through Sirte to Tripoli, but if negotiations failed they would resume their attack today.

Victims of snipers filled Tripoli hospitals. “There are around 60 here,” Tahr Kateb said as he searched for the body of a nephew in a makeshift morgue at Tripoli’s al-Zawiyah hospital.

At another hospital, Ali Modir said his mother was shot by a sniper when she left the safety of her house. “She wanted to go shopping,” Modir said, weeping.

Rebels also reported fighting around the city of Sabha, another Gadhafi stronghold south of Tripoli with a strong presence of loyalist troops — and another possible place of refuge for the Libyan leader himself.

The hunt for Gadhafi is one of the priorities for many Libyans, and NATO is providing intelligence and reconnaissance help while continuing to bombard loyalist troops from the sky, said British Defense Secretary Liam Fox.

“They may take some time to completely eliminate, and it is likely there will be some frustrating days ahead before the Libyan people are completely free of the Gadhafi legacy,” Fox told Sky News.

Gadhafi’s spokesman, Moussa Ibrahim, told The Associated Press that the fugitive leader was safely in hiding in Libya and remained in command. Gadhafi is capable of leading the resistance for “weeks, months and years,” he said.

Many people in Tripoli say they will not feel secure until the man who has ruled them through fear for 42 years is killed or captured.

In his audio message Thursday, Gadhafi himself continued to use fear as one of his main weapons, warning supporters that rebels would enter people’s homes and rape women.

“Don’t leave Tripoli for the rats. Fight them, fight them and kill them,” he said. “It is the time for martyrdom or victory.” It was not clear when the audio message was recorded.

The country’s former central bank chief said Gadhafi had been trying to sell the country’s gold reserves to pay for his protection as he fled, possibly in the direction of the Algerian border.

“Now he is looking to pay and corrupt some tribes and some militia to have protection and to create further chaos,” Farhat Bengdara, who has allied himself with the rebels, told the Italian daily Corriere della Sera.