Rebels retreated from the key Aleppo district of Salaheddin under a deadly rain of shellfire Thursday, as a veteran Algerian diplomat was set to be named the new international envoy to Syria.

"We have staged a tactical withdrawal from Salaheddin. The district is completely empty of rebel fighters. Regime forces are now advancing into Salaheddin," said Hossam Abu Mohammed, a Free Syrian Army (FSA) commander, with the battle for Syria's commercial capital raging into a second day.

"The fighters are withdrawing to (nearby) Sukari district, where they are preparing a counter-attack," he told AFP by telephone.
Abu Mohammed cited heavy shelling and the army's use of thermobaric bombs, which throw out a wall of fire to incinerate targets in enclosed spaces.

In Damascus, a security source said regime forces were "advancing quickly" in Salaheddin towards Saif al-Dawla.
"But the next big battle, which will be very fierce, will be in the (southeastern) Sukari district," he added.

At least 17 people were killed in Aleppo, scene of fierce battles since July 20, the Observatory said, adding that two children and a citizen journalist were among them.

Nationwide, the toll reached 96 -- 37 civilians, 31 soldiers and 28 rebels -- according to the Observatory. That compared with 167 on Wednesday, including 33 in Aleppo.

Elsewhere, fierce fighting also broke out in Damascus province, where at least 15 people were killed, most of them civilians, while regime forces shelled Zabadani, the monitoring group said.

On Wednesday, loyalist troops launched their offensive against the rebels, who had claimed to control half the city, after President Bashar al-Assad vowed a day earlier to crush the rebellion that erupted in March 2011.