Villa have dropped down to fight in the PRemier League after a recent poor run of results.
O’Neill’s side will face Manchester United at Old Trafford on Sunday.
He said: “It looks a lost cause to anyone from outside.
“Arsenal have got the momentum and we’ve been dipping but it’s still a possibility and while it remains a possibility we will be going for it.
“I think we are capable. From a distance it sounds like bravado. But a few weeks ago everyone involved in football thought Manchester United had the title wrapped up and now it’s a different ball game.”
O’Neill added: “It will be a long time since United have faced losing three on the trot.
“That’s very unusual in the last decade so they will be fired up. They have a championship to protect, a title to win.”
