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Last month, I talked about the race between the U.S. and China for black gold: Crude oil. I mentioned that four Chinese oil companies—China National Offshore Oil Corporation (CEO) among them—are assessing fields in Iraq to bid against oil giants Exxon (XOM), Chevron (CVX), BP (BP), Shell (RDS.A) and Total (TOT) for exploration rights.

I thought I'd give you an update on the situation as it unfolds in the Middle East.

Iraq announced that it's on the brink of reviving an 11-year-old, $1.2 billion contract with China. The agreement has obviously been revised since the original terms were set under Saddam Hussein's regime in 1997. The primary difference now is that the new contract is service-based, which means China would be paid for its work at an oilfield in southeast Baghdad but would not own a profit-sharing stake.

Basically, Iraq wants the oil from the Ahdab field, which is expected to produce 90,000 barrels a day. Even though the country is enjoying windfall profits from its vast oil reserves, many of Baghdad's residents spend their days without electricity or clean water. This is why Iraq's Oil Ministry has been so eager to tap into existing reserves—to power its own cities.

But the problem is Iraq doesn't have the manpower or the technology to expand oil production. The most obvious solution is to outsource and bring experienced foreign oil companies in-house to do the work for them.

And China is at the top of the list. Remember, China's political non-interference policy has already gained the country blanket access to oilfields in politically unstable countries like Sudan and Chad. This is an advantage China holds over the U.S. because America refuses to invest in countries it perceives to be corrupt or oppressive.

It's too soon to tell which Chinese oil companies will be directly involved in this service contract. My hunch, however, is that China will take the deal to affirm its presence in the Middle East. Similarly, as I told you in my e-Letter recently, China's economy is booming and companies there are growing at a rapid rate. The nation's super-charged economy has a huge appetite for energy, and will continue to look to places like Iraq for more oil.

On a somewhat related note, there's been a lot of other activity in China's oil sector that's worth mentioning. The country's oil giants—oil and natural gas producer PetroChina (PTR) and refiner Sinopec (SHI)—made a joint bid for a U.S.-owned Peruvian driller. This is a strategic move for two key reasons:

• It prevents China's state-owned companies—like CNOOC—from bidding for the same assets and driving up the takeover price;
• It allows companies to combine resources that are already constrained by high crude oil prices and state-controlled retail gasoline prices.

I'm bringing these events to your attention because this is exactly the kind of news I consider when recommending stocks to subscribers across all four of my services. What these events tell me is that despite the dire state of the global economy, Chinese companies are responding to the market and adapting their business activities accordingly. Chinese oil companies are fair game in today's market, and it's important that we keep up with their projects.

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