The former Aston Villa manager acknowledged that it was a frustrating evening but conceded results like this can happen as players are looking to get up to match sharpness.
"Fitness is improving, overall I wasn't pleased with the performance but it's pre-season," O'Neill told reporters. "Players are just starting to get themselves into condition and we can definitely improve.
"I thought we got a bit stronger in the second-half and I suppose on the face of it you work under the assumption that we are getting fitter.
"I thought Hartlepool played very well indeed and had plenty of enthusiasm about their game and they caused us plenty of problems."
Sunderland have had a busy schedule after returning from the Peace Cup in South Korea earlier this week, where they played twice in three days.
They now have a week to prepare for their trip to Sweden to play Helsingborgs, and O'Neill is grateful for the change of pace after a frenetic week.
"We'd been back three days, then we went out Korea with two games in relatively quick succession in hot and humid conditions and now we're back here playing on home soil," he explained.
"So it's been pretty hectic the last couple of weeks, but we've got really a free week to work on a lot of things such as fitness and patterns of play and to get ourselves prepared for the next couple of friendly games leading up to the start of the season."
Youngster Ryan Noble again featured for the Black Cats after playing in their two matches in Korea and with O'Neill short of options up-front after Nicklas Bendtner's return to Arsenal the striker could push for a place come the start of the season.
However, the 60-year-old believes there are still areas in Noble’s game which need to improve before he can become a first-team regular.
He said: "Ryan scored a really good goal a few days ago in Korea and that should have really given him a really huge boost in confidence, he knows himself what he has to do to try and get in the team.
"The Premiership is an unforgiving league, it's as physically strong as it's been now for quite some considerable time. That doesn't mean someone slender and light can't perform, in fact there is quite a number of excellent players who aren’t the heaviest.
"He knows in a physical sense he needs to get stronger and obviously hold up play he needs to improve but he knows where the net is. There is improvement in his game."
O'Neill also hailed the approach of midfielder David Meyler and hopes he can keep himself fit after a spate of injuries have kept him out of the majority of the past two seasons.
"I've know David a few months, his attitude has always been spot on in training, he's there every single day," O'Neill added. "He's a great character around the dressing room and what he wants to do himself is get a run of games.
"Like most players I'm unable to promise anything but he's played in the three matches for us now and in terms of his fitness that is something he probably lacked last year because he didn’t get enough playing time."