LAGOS – The rebel Movement for the Emancipation of the Niger Delta (MEND) Friday declared "all-out war" in Nigeria's southern oil region, blaming the security forces for the death of one of their hostages.

The group also alleged the army had deliberated targeted civilians in its latest attacks.

Nigeria's military denied both accusations.

The hostage was killed by a stray army bullet during a clash between MEND's fighters and the Nigerian security forces in the oil-rich region, said a statement from the movement.

"He is a Filipino national," a spokesman for MEND said in a statement to Agence France-Presse.

Earlier Friday, MEND repeated a warning to foreign oil producers to pull out of the region by midnight (2300 GMT) or risk being caught up in increasing violence.

"MEND is declaring an all-out war in the region and calls upon all men of fighting age to enlist for our freedom," the group said in a statement to the media.

"The Nigerian armed forces today launched indiscriminate aerial bombardment on the defenseless civilians in the Gbaramatu region of Delta State," MEND charged.

Oil markets, however, remained largely indifferent to the warning, with two benchmark contracts falling back towards the $58 mark.

MEND has so far provided no further details on the hostage they say was killed.

It has not said if he was part of the group of 15 foreigners held hostage aboard the 'MV Spirit' tanker hijacked on Wednesday.

"One hostage has been killed by stray bullets from the Nigerian army who attacked an area [where] they were being held in Delta state," the MEND said in an earlier email.

A spokesman of the special military unit in the volatile region, Colonel Rabe Abubakar, denied the rebel account of their gun battle with the MEND fighters.

"It is a lie. None of them was killed," he told AFP.

Earlier, he denied accusations that his forces had targeted civilians, and dismissed rebel claims that they had got the better of his men. Operations were still ongoing, he said.

"We did not target civilians in the operation because these are the people we are out to defend and protect," he told AFP.

"Our target is the militants, who are the criminals and we will not stop until they are completely flushed out."

He refused to comment on MEND reports of air attacks, describing the operation as "multi-faceted."

Earlier Friday, Jonjon Oyeinfie, an activist and former ethnic Ijaw youth leader in the region, said a fierce battle was raging along the Warri-Forcados river, with the army deploying 13 gunboats and helicopter gunships.

A Warri resident reported having seen clouds of smoke rising from the Chanomi Creek area in Gbaramatu.

MEND also said it had captured a "warship deployed from Liberia to assist the military... along with its entire crew of officers and ratings" and was in the process of setting it ablaze.

Navy spokesman Commodore David Nabaida dismissed MEND's statement.

"This claim is mere propaganda," he told AFP.

"MEND has no capacity to capture our warship or any of our ships for that matter. Again, we do not have any ship deployed from Liberia to Niger Delta."

The rebel group said it had captured three army gunboats intact and had sunk or destroyed nine others.

"Many soldiers have been killed and the military has made a hasty retreat," the group said.

Major oil companies, including Shell and ExxonMobil, have declined to comment on the threats.

In the past three and a half years MEND has been behind a series of kidnappings of staff and attacks on oil installations.

It says it is fighting for a greater share of the region's vast oil resources.

Unrest in the region means Nigeria last year lost its position as Africa's leading crude exporter, to Angola. Its oil output has fallen by about a quarter since 2006.

Nigeria, a member of the Organization of Petroleum Exporting Countries, derives more than 95 percent of its foreign exchange earnings from crude oil.