In a bid to cut North Korea's sources of funding for its nuclear and missile programs, the draft resolution seeks to ban about 90 percent of exports of refined petroleum products to the North.
It would also cap crude oil supplies to North Korea at 4 million barrels a year.
Two North Korean cargo vessels, Ul Ji Bong 6 and Rung Ra 2 along with two North Korean oil tankers Sam Jong 2 and Rye Song Gang 1 are on the proposed blacklist as are the Chinese tugboat Yu Yuan and the Glory Hope 1 (also known as Orient Shenyu), a Panama-flagged cargo ship.
The UN Security Council is expected to vote on a new set of sanctions against North Korea as early as Friday.More news: 5-star DE Micah Parsons commits to Penn State
China, which supplies most of North Korea's oil, has backed successive rounds of United Nations sanctions but has resisted past USA calls to cut off supplies to its neighbour.
The UN Security Council will reportedly vote this week on new sanctions on North Korea in response to its latest launch of an intercontinental ballistic missile (ICBM).
However, North Korean leader Kim Jong Un during a speech on Thursday "stressed that nobody can deny the entity of the DPRK which rapidly emerged as a strategic state capable of posing a substantial nuclear threat to the USA", according to North Korea's official KCNA news agency.
"We can't talk unless North Korea is ready to talk", US Secretary of State Rex Tillerson told reporters after meeting with Canadian Foreign Affairs Minister Chrystia Freeland.