The nine-time world rally champion finished the seventh stage from Riyadh to Al Duwadimi seven minutes and six seconds clear of Toyota's Brazilian Lucas Moraes with Qatar's defending champion Nasser Al-Attiyah third despite two punctures.

Audi driver Sainz was fourth, losing 10-and-a-half minutes to Loeb's Prodrive Hunter in the rally that started on January 5 and ends on Friday, January 19.

"Quite a difficult day, with the navigation. We also had a puncture. I think Seb did really well. 10 minutes is quite a lot," said triple Dakar winner Sainz, whose son and namesake is the Ferrari Formula One driver.

Moraes moved up to third overall but more than an hour off the lead.

"We were really concentrated on our job and I was pushing hard, trying to be very conscientious in the tricky navigation parts, and we did it very well," said Loeb.

The battle has become a duel between the French veteran and 61-year-old Sainz, whose Audi team mate Mattias Ekstrom plunged off the provisional podium after hours lost due to a broken rear axle.

Audi's hopes of a first Dakar win for an electric-powered car now rest entirely on Sainz after Stephane Peterhansel was knocked out of contention last week.

Al-Attiyah's hopes of a third successive Dakar victory and career sixth slipped away in the sand last week when he suffered a steering problem and lost more than two hours waiting for assistance.

In the motorcycle category, Chilean Jose Ignacio Cornejo won the stage while American Ricky Brabec retained the overall lead for Honda by a single second from Botswana's Ross Branch after 2,865km of timed action.

The gap, after 32-and-a-half hours of racing, comes down to about 24 metres.

"The one second difference is crazy, that’s a tight race for sure," said Brabec.

"I’ve spent seven days up front opening with my team mates, so I’m kind of looking for a break at some point to come from the back and really make a charge."