Danish Oil is usually a blend of linseed oil and varnish, thinned way down. A standard brand is 2/3 tinner, and 2/3 of what's left boiled linseed oil, and the remainder varnish and colorant (if any). As you have guessed. it's sealed the wood and prevented the "penetrating stain" from doing its job as designed.

It's hard to make specific suggestions without knowing exactly where you want to go with respect to the look and feel of the final finish, the color you are shooting for, and where you've been in terms of what is the wood species, the geometry of the piece, if the Danish oil had a colorant, and how much Danish Oil you've put on. Unless you are an experience sprayer, I'll rule out toners. So that leaves two options that I'd consider,

1) Glaze to add some color and seal with another coat or two of finish. Depending upon what you have, you may pick up midway through one of the following processes:
http://www.homesteadfinishing.com/htdocs/eamaple.htm
http://www.homesteadfinishing.com/htdocs/mission_oak.htm (see the link at the end of the second URL to see an all-hand-applied schedule)
If you try this and it doesn't work to your satisfaction, proceed with option 2 as a back-up.

2) Strip the finish, start over by sanding, _testing your finish on a piece of scrap first_, then proceeding to restain and re-apply new finish.

Hope that helps.

Thanks, I'm trying the sanding method. I've sanded a lot and clogged up a lot of sandpaper, and still see a lot of the initial color. I hope that's just color and that I can stain over it.

Use a darker shade of 'danish oil'.

I used Watco to finish pine molding and now want to paint over it. my questions are can i use a latex or do i have to use an oil based paint?

A good insurance policy would be to put on a thin coat of de-waxed shellac. Then you can do whatever you want.

Shellac forms a barrier coat and a serves as a pore-filler and primer. It will also prevent resins from bleeding through. Walnut tone formulations of Watco have Gilsonite (a tar) as a colorant. Shellac will also seal that in and prevent bleed-through.

You could also use Zinsser's BIN primer, that is a pigmented shellac. You could have the paint store tint it if you want.

Here is a link that might be useful: SealCoat