NEW YORK (MarketWatch) — You can’t beat oil futures for excitement. After suffering a monumental second-half 2014 beatdown that extended into the new year, crude has roared back by 20% over the last three trading sessions.

How wild was the rally? Matthew Weller, senior technical analyst at Forex.com, notes that when Nymex West Texas Intermediate (WTI) oil futures CLH25, climbed for the first time from $44 to $53 a barrel back in 2004, the rally took nearly three months. And that was a “fairly quick” period for a gain of more than 20%, he said in a note.

This time around, oil futures did the same thing in less than three days, rather than three months.

So what happened? Here are three possible explanations:

Did somebody say short squeeze? Shutterstock

Just a head fake

Maybe it’s all down to a short squeeze. Oil’s plunge from around $107 a barrel in June for Nymex crude to less than $44 a barrel last week eventually invited some speculative short selling in a market that had become a virtual one-way bet. That can be a recipe for a violent snapback.

The Commodity Futures Trading Commission on Friday said non-commercial speculators increased their long positions in Nymex WTI oil futures by 15,773 contracts in the week ended Jan. 27, but that was more than offset by a rise in short positions of 22,771 contracts.

Oil bears argue that little has fundamentally changed, as crude supplies continue to build, and questions remain over the outlook for demand. “For instance, the U.S. economic data [are] uninterruptedly on the downward side, and this has jammed their GDP reading, and even the ISM manufacturing data released [Monday] was pretty terrible,” said Naeem Aslam, chief market analyst at Ava Trade. “Then we have China, the second-biggest economy of the world, which is sparring with meager growth, so I do not see any sign of demand picking up any time soon.”

Rig counts are falling. Getty Images

The bottom is in

Or maybe oil futures have finally met their match. The start of the rally last week seemed to coincide with data showing another steep drop in rig counts. The bounce also comes as one oil producer after another announced plans to slash spending in response to the oil-price drop, and as a refinery strike takes a toll on output.

Phil Flynn, senior market analyst at Price Futures Group, proclaimed that the test of the $44 a barrel level marked the bottom.

Even seemingly bearish news, like a weak reading of a Chinese manufacturing activity index, is now viewed as friendly since it signals the potential for more Chinese stimulus, Flynn said.

“The truth is that with the drop in rig counts and massive cuts in capital spending, not to mention a refinery strike, the fundamentals are changing right before our very eyes,” he said in a note.

Dollar rally takes a pause. Reuters

It’s about the dollar

The U.S. dollar is taking a break from what had been a breakneck rally, with the ICE dollar index DXY, +0.03% , a measure of the U.S. unit against six major rivals, pulling back by about 1% Tuesday and losing around 1.3% over the last two days.

Some currency analysts contend the dollar was weakened as oil rallied. Big gains for oil led to big gains for commodity currencies, such as the Canadian dollar USDCAD, +0.00% , which in turn weakened the greenback.

However, it’s the dollar that’s seen calling the tune for oil and other commodities priced in the U.S. currency. Some strategists have argued that oil’s steep second-half 2014 plunge was primarily the result of the U.S. unit’s steep rally (the dollar index in 2014 saw its biggest yearly gain in nine years). A stronger buck makes commodities priced in the dollar more expensive to buyers using other currencies.

Deutsche Bank strategist Binky Chadha said late last year that oil would likely rebound once the dollar rally paused.