South Sudan's army said on Tuesday it was battling rebels in three key states, as insurgents blamed for massacring hundreds of civilians in attacks last week continued an offensive targeting oil fields.

The rebels seized the town of Bentiu last week, unleashing two days of ethnic slaughter as they hunted down civilians sheltering in mosques, churches and a hospital, according to the UN.

READ: South Sudan army admits loss of key oil town of Bentiu

Bentiu is the capital of the key oil-producing state of Unity. Government forces say they have been forced to pull out of another major settlement nearby amid furious rebel attacks.

"The battles have been very heavy in Unity state," army spokesman Philip Aguer told AFP, adding that troops made a "tactical withdrawal" from the town of Mayom, a strategic local centre made up of dusty roads and thatch huts, some 50 kilometres (30 miles) west of Bentiu.

South Sudan's army has been fighting rebels loyal to sacked vice president Riek Machar since the unrest broke out more than four months ago.

The conflict has an ethnic dimension, pitting President Salva Kiir's Dinka tribe against militia forces from Machar's Nuer people.

"Fighting is ongoing, we are close by and will not let the rebels advance further," Aguer added, insisting that the army remained in control of major oil fields and the country's refinery, also in Unity state.

Worst atrocities

In Bentiu, the United Nations on Monday reported one of the worst atrocities in the conflict.

Toby Lanzer, the top UN aid official in the country, told AFP after visiting Bentiu he had witnessed the "most terrible sight".

"There are piles of bodies lining the streets where they had been executed, in the market, outside and inside places of worship... the majority wearing civilian clothes," Lanzer said Monday.

Fighters took to the radio to urge men to rape women from the opposition ethnic group and said rival groups should be forced from the town, the UN said.

Rebel spokesman Lul Ruai Koang on Tuesday rejected the UN accusations as "unfounded, cheap propaganda", pinning the blame on government forces.

But the UN said the killings continued for two days after the rebels claimed victory in the town, including issuing a statement boasting of "mopping and cleaning up operations".

The United States has threatened sanctions against those responsible for continuing the war.

The US ambassador to the UN Samantha Power in a statement Tuesday warned that "all responsible for South Sudan horrors and deliberately targeting civilians must be held accountable."

READ: Obama warns South Sudan to stop fighting or face sanctions

Heavy fighting on Tuesday was also reported in the eastern state of Jonglei, and in Upper Nile in the northeast, with Aguer boasting the army had repulsed the attacks and killed scores of rebels.

"In Upper Nile... the number of rebels killed was 48," he said, claims that were not possible to independently verify.

"In Jonglei... the fighting was heavy but the rebels were fought back," he added.

Children

In Bentiu, some 23,000 terrified civilians have crowded into the cramped UN peacekeeping base for protection, where under both fierce heat and heavy rains -- and little if any shelter -- they are surviving on just a litre of water a day.

READ: Juba on brink of collapse as war rages with millions staring at starvation

Jonathan Veitch, the UN children's agency chief in the country, warned Tuesday of the "very real risk of fatal water-borne diseases".

"Children have endured unspeakable violence," Veitch said in a statement. "They must not continue to suffer in places that should provide safety."

The conflict in South Sudan, which only won independence from Sudan in 2011 and is the world's youngest nation, has left thousands dead and forced around a million people to flee their homes.

The fighting has been marked by reports and allegations of atrocities by both sides.

Peace talks are due to restart in neighbouring Ethiopia later this month, and despite the worsening conflict, South Sudan Information Minister Michael Makuei said the government remained committed.

"What we want is peace not war...we will still go and negotiate," he told AFP, but said he feared rebels wanted to fight on, and that if so, the government had the "duty to protect its citizens."