Libyan Navy and pro-government militias have dispatched boats to a port held by a rival militia to stop a North Korean flagged tanker from exporting oil sold without government permission.
The government has banned militias from selling crude oil directly to the world market.
Libyan Prime Minister Ali Zeidan has threatened to bomb the tanker if it does not comply with Libyan government orders. He said the bombing would result in an "environmental disaster."
Armed gunmen forced workers loyal to the government to dock the ship Saturday. A militia spokesman has warned the government not to try to stop the shipment.
Analysts say the military would probably struggle to overcome rebels battle-hardened in the uprising to topple Moammar Gadhafi in 2011. The rebels have kept their weapons and now challenge state authority.
The oil dispute is just one facet of the deepening turmoil in the North African OPEC member nation. Zeidan, appearing to be overwhelmed by the numerous challenges his administration is facing, recently said "everyone is working against the government."
Bringing Libya's factions and heavily-armed militias together under one flag continues to pose a great challenge. Analysts say the consequences of failure would affect the entire region.