The 49-year-old was positive despite the disappointing result, as his side put in a performance that saw them enjoy 67 per cent possession and register 26 total attempts on goal.
Defender Craig Cathcart called the game one of his most complete performances for his country, and O'Neill was similarly upbeat.
"To play with that intensity and dominance, with close to 70 per cent possession in the game, 26 attempts on goal, 18 corners - it tells the story of the game," said O'Neill.
"Where we have to be better is the final ball and maybe a little bit better with movement in the box and composure as well. Maybe it's anxiety as well, but those are things we can work on.
"We'll take a lot out of our performance and we'll look to react on Tuesday night when we play Israel here.
"At the end of the day we're a team still progressing and still going in the right direction."
O'Neill revealed that he would be taking Tuesday's home match against Israel very seriously.
"They will harbour ambitions to go to a major championship. They probably think they've underachieved in recent times a little bit," he said.
"Like all these games, there is always a significance to it. We will field a strong team and give game time to players who didn't get the chance to start on Saturday," he continued.