Investors are rushing to hedge oil bets after Delta variant jitters gave crude its biggest drop this year

• Investors are trying to hedge their oil bets after Monday's beating, according to a Wall Street Journal report.
• Some particularly prescient traders had already hedged their position before Monday's oil turmoil.
• Analysts still expect oil to climb, arguing fundamental supply and demand dynamics are unchanged.

Oil took a beating during Monday's sell-off, leading investors to hedge their bets despite the prevailing bullish sentiment, according to a Wall Street Journal report.

The sell-off, widely attributed to mounting concerns over the Delta variant, sparked oil's biggest drop this year, pushing oil futures down as much as 8.6%. As oil plunged, briefly falling below $66, oil investors piled into put options to protect against further price declines.

Some particularly prescient traders had already hedged their position before Monday's turmoil. Early last week, put options with a $66 strike price saw massive trading activity, Bob Yawger, director of energy futures at Mizuho Securities, told the Journal.

"Whoever it was is getting the old pat on the back today from their boss," added Yawger.

Implied volatility, a proxy for market expectations of future price action, surged to 41.2% on Monday, according to QuikStrike data cited by the Journal.

Yet analysts still expect oil to climb in the coming months, arguing that fundamental supply and demand dynamics remain unchanged. Daily oil production is 2.3 million barrels short of demand, according to a Goldman Sachs estimate.

Goldman and UBS have set their oil price targets at $80 per barrel, while other analysts are eyeing even higher prices. Bank of America is calling for $100 per barrel by 2022.

West Texas Intermediate futures were trading at $70.46 as of 1:26 p.m. ET, up 4.85% on the day so far.