"The American side is putting pressure on us to pass the law in any form. They are concerned with the form of the law rather than the content of the law," said Omar Abdul-Sattar Mahmud from the Sunni National Concord Front, the largest Sunni parliamentary bloc.

The bill talks of equitable distribution of the country's oil wealth among the nation's rival Shia, Sunni and Kurdish communities and is seen by Washington as a key plan for ending the civil conflict in the country.

Mahmud's faction, along with the followers of radical Shia cleric Moqtada al-Sadr, are currently boycotting parliament, but Mahmud said his members were participating unofficially in deliberations on the draft legislation.

On Thursday, the White House published an interim report in which it faulted the Iraqi government for making satisfactory progress on only eight of 18 security and political benchmarks set by the US Congress.

Baghdad was found to have made "unsatisfactory" progress on legislation explicitly endorsed by Washington as central to efforts to quieten sectarian violence, including the oil bill.

In his first reaction to the report, Iraq's Prime Minister Nuri al-Maliki said it was "positive" but not entirely fair.

"We thought most of the report was positive but that does not mean that the report treated all the issues with accuracy," Maliki said, adding the country's political gridlock was to be expected.

"This is normal for a complicated situation like Iraq. We cannot say that the political situation in Iraq is easy because it is the first time in our history that we have a national unity government."

With a month-long holiday scheduled to begin in August, the assembly will be hard-pressed to meet the benchmarks by September, when the US military will publish an interim report on President George W Bush's troop "surge" strategy.

Shortly after the report was published White House spokesman Tony Snow fielded questions from reporters about the holiday, which has drawn the ire of many in the United States.

"My understanding is at this juncture they're going to take August off, but you know, they may change their minds," Snow said.

"You know, it's 130 degrees (54 Celsius) in Baghdad in August."

Reminded that the heat affected the roughly 160,000 US troops in Iraq, Snow replied: "You know, that's a good point. And it's 130 degrees for the Iraqi military."