Oil exchange-traded funds (ETFs) offer direct access to the oil market by tracking the price of oil as a commodity. This approach is different from investing in funds that own a portfolio of oil stocks. There is potential for significant returns through investing in the oil sector, but also sizable risks. Oil prices historically have been prone to quick, dramatic swings up and down.

There are currently 5 oil ETFs, excluding inverse and leveraged funds as well as those with under $50 million in assets under management (AUM). The best oil ETF for Q3 2020 by one-year performance is the Invesco DB Oil Fund (DBO). Below, we'll look at the top 3 oil ETFs for Q3 2020. All figures are as of June 19, 2020.

The early 2020 oil price war and the COVID-19 pandemic drove oil prices to record lows in April, 2020. While prices have risen since then, oil markets have remained extremely volatile, and investing in the oil sector has become substantially more risky than usual. Prices and data in this article were accurate at the time of writing, but likely have changed significantly as a result of the aforementioned market volatility.

Invesco DB Oil Fund (DBO)

  • Performance over 1 year: -26.1%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 2.53%
  • 3-Month Average Daily Volume: 2,974,582
  • Assets Under Management: $495.3 million
  • Inception Date: January 5, 2007
  • Issuer: Invesco

The Invesco DB Oil Fund offers exposure to sweet light crude oil by tracking the DBIQ Optimum Yield Crude Oil Index Excess Return, which is a rules-based index composed of futures contracts on Light Sweet Crude Oil (WTI). The goal is to reflect the broader performance of crude oil. The fund is structured as a commodity pool. The sole holding of this fund is sweet light crude oil (WTI).

United States 12 Month Oil Fund (USL)

  • Performance over 1 year: -28.7%
  • Expense Ratio: 0.82%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 1,166,383
  • Assets Under Management: $293.1 million
  • Inception Date: December 6, 2007
  • Issuer: USCF

Like DBO above, USL is a commodity pool utilizing futures contracts and offering exposure to light sweet crude oil. It tracks the commodity's delivery to Cushing, Oklahoma, a major trading hub and price-settlement point for oil. One way that USL is set apart from other oil funds is that it diversifies across multiple maturities, helping to mitigate risk. The sole holding of this fund is sweet light crude oil (WTI).

United States Brent Oil Fund (BNO)

  • Performance over 1 year: -40.7%
  • Expense Ratio: 0.90%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 3,054,129
  • Assets Under Management: $434.0 million
  • Inception Date: June 2, 2010
  • Issuer: USCF

United States Brent Oil Fund, a futures-based commodity pool, does not track West Texas Intermediate, like the two funds above. Rather, BNO tracks Brent Crude Oil, the benchmark for the EMEA region. Because Brent often trades at a different price from WTI, BNO can be a useful way of gaining alternative exposure. The sole holding of BNO is Brent Crude Oil.