NATO allies are weighing when to call an end to the air campaign in Libya now that Moamer Kadhafi's forces are surrounded and often beyond the reach of Western warplanes, officials said Wednesday.

Forces loyal to the deposed dictator are encircled in Sirte and Bani Walid and hiding among the local population, rendering NATO fighter jets less effective and raising the risk of civilian casualties, officials said.

"The effect of air power is not necessarily the right tool with these kind of threats," a Western official, who spoke on condition of anonymity, told AFP.

Kadhafi's loyalists, who had once rolled across open desert in trucks and tanks, are no longer a natural target for NATO aircraft as they shelter in built-up areas.

"You can't hit something that's not there," the official said. "A sniper on a rooftop -- that's not really something we would go after (with air power)."

Reflecting a shift in the war, the number of NATO air strikes has dramatically declined in recent weeks, with only one bombing raid reported on Tuesday compared with about 15-20 air strikes a day earlier in the conflict, NATO officials said.

NATO defence ministers meeting in Brussels on Wednesday and Thursday are discussing how and when to call time on the six-month campaign, which has been credited with turning the tide in the conflict and forcing Kadhafi into hiding.

Allied air strikes began in March when Kadhafi's soldiers had rebels on the back foot, and helped tip the balance in favour of a loose coalition of Kadhafi opponents who overran the capital Tripoli in August, winning international recognition.

Supreme Allied Commander Admiral James Stavridis offered his assessment of the air war as NATO Secretary General Anders Fogh Rasmussen said he was "encouraged by progress" in the campaign.

Rasmussen said the decision to halt the operation would hinge on the ability of National Transitional Council (NTC) forces to maintain order and not the fate of Kadhafi.

"The termination of the operation is not dependent on Colonel Kadhafi," he told reporters.

"We will carefully assess the security situation and in particular, of course, take into account the capability of the National Transitional Council to protect the civilian population effectively."

Officials said the alliance had to make a political judgement, balancing the need to prevent attacks on civilians while avoiding the impression of meddling.

"It will be a political decision, which will involve the UN and the NTC and it will be a question of an international concert of opinion that the time has come," said a senior NATO official.

"The big risk is that one day we stop and the next day there is a massacre, in which case we would have failed."

Senior military officers overseeing the operation from Naples, Italy, were increasingly eager to call an end to the effort given the retreat of Kadhafi's troops, officials said.

But alliance members are waiting for a clear conclusion to fighting in Sirte and Bani Walid, where NTC troops are trying to finish off Kadhafi loyalists.

A decision to announce an end of the campaign could come later this month if current trends continue, he said.

The mounting cost of the air war is weighing on the minds of NATO governments, which are already grappling with budget pressures that have squeezed defence budgets.

There were also practical challenges to wrapping up the mission as NATO has managed air traffic control and it was unclear if the new leadership would be ready to take over that responsiblity, officials said.