To compensate for the military and political failure of the US administration in Iraq, this administration is trying to control the country's wealth," the organisers said in a statement distributed to reporters.
"If this is endorsed by the parliament it would abolish sovereignty and hand over the wealth of this generation and the generations to come as a gift to the occupier," the statement said.
The protesters, employees of the Oil Pipelines Company, wore black surgical masks over their faces and carried banners and black coffins with the word "freedom" written on the sides.
At issue is a clause in the draft hydrocarbon law allowing for production-sharing agreements with foreign oil companies, which many Iraqis see as a throwback to an earlier era of colonial exploitation.
"This law, in fact destroys the achievements of the Iraqi masses and especially the Law number 80 of 1961 and the nationalisation of 1973," the statement said.
The law from 1961, part of a bundle of socialist reforms issued by then-Prime Minister Abdul Karim Qassim, sharply limited foreign involvement in the oil sector.
US officials see the passing of the draft hydrocarbon law -- aimed at equitably distributing Iraq's oil proceeds -- as a crucial benchmark of the country's political process and a key component of national reconciliation.
© 2007 Agence France Presse