Goals from Clint Dempsey and Moussa Dembele condemned the Black Cats to their 10th defeat on the road this season despite Phil Bardsley’s first-half strike.
The Black Cats manager was made to rue the opportunities not taken by his side - especially Fraizer Campbell, who missed a glorious chance in the second half when one-on-one with Mark Schwarzer.
O’Neill told reporters: “I think that we obviously missed some gilt-edged chances and eventually that proved the difference.
"But it's something that we're aware of. Those were relatively simple chances for us and while scoring a goal is still difficult, it might not be that difficult.
“Overall it was an encouraging performance by us. In possession, we passed the ball pretty well today. To concede just after we've scored a great equaliser was particularly galling.
"But overall, we're learning - Ji's first start was good, there were some very encouraging signs.”
O’Neill admitted his frustration as his side conceded so soon after drawing level, Dembele giving the Cottagers the lead just seconds after Bardsley levelled for Sunderland.
He added: “I think we were maybe distracted [after scoring the equaliser] by the fact that [Stephane] Sessegnon had to change footwear.
“And within 10 seconds of kick-off they've made it 2-1 so it nullifies our goal immediately and sets you on the back foot. We should have done better. We should have dealt with it better.”
Despite his side winning just one of their last seven league games O’Neill is happy with the way his team are playing, but feels they are not getting the rewards they deserve.
“We've played well just recently," he continued.
"We went to Manchester City and drew 3-3, and we should have won that game. We should have won at Aston Villa but the linesman's chalked off a goal. But you're going to get that over the course of the season.
“Some of the games we won earlier this year, big games that we won - we might have played with less possession than we had today. We had loads today, particularly away from home. You don't want to lose games.”
O’Neill is now looking to Sunderland’s final game of the season against Manchester United, which he believes will be a great occasion no matter what the situation is with the title race.
The Black Cats boss is hopeful of ending the season on a high note and is delighted not be in the relegation dogfight at the foot of the table.
He said: “It's a great fixture for us to end the season with. Really great. I'm looking forward to that. Manchester United is a big fixture, regardless of [the title race].
“Well, thanks for reminding me [that they need to win by 10 goals]. I'll try and block that out. I wouldn't have liked to have been under that sort of pressure that the teams below us are.
“Maybe we can learn from that. We've got one more game to go, a great fixture for us, and come back in pre-season and refreshed and ready.”