Oil shales from the Yamalikeshan (YML), Shuimogou (SMG) and Sangonghe (SGH) sections of the Lucaogou Formation in the southeastern Junggar Basin, Northwest China are rich in organic matter and have high hydrocarbon generation potential, as shown by bulk Rock-Eval and chloroform extract analyses. The contrast in organic composition between the oil shales implies that Sangonghe is the richest hydrocarbon source rock section in the studied area in the Junggar Basin. The distribution of biomarkers and organic carbon isotope parameters indicate that oil shales of the Lucaogou Formation were deposited in a cool and humid paleoclimate and that some layers were partly subjected to microbial modification. In addition, the Sangonghe oil shale suggested a strongly reducing depositional environment, deeper and higher-salinity lake waters and a higher input of lower aquatic organisms compared with oil shales of the other two sections. Therefore we conclude that brackish reducing deep lakes were favourable for the development of petroleum source rocks. Ketones and aldehydes were identified in two Yamalikeshan oil shale samples, while ketones and fatty acid methyl esters (FAMEs) were found in the other two samples from the same section. In none of the samples the co-existence of all three compounds was established. The unique occurrence of aldehydes and fatty acid methyl esters may imply the varying depositional environment of the Yamalikeshan section.