Northern Ireland fought back from 1-0 down to draw level through Isaac Price before Liverpool's Florian Wirtz and Nadiem Amiri struck to earn the Germans a 3-1 win.
"We are very proud of the display, but there is a real sense of disappointment in the dressing room, which is understandable," O'Neill told BBC Sport NI.
"This is a really tough game, second game in a short period of time. It showed we weren't able to make changes. We just don't have the depth to cope in this situation."
O'Neill also lamented: "For 60 or 65 minutes, we were well in the game. The second goal is a bit of a freak goal, we could have defended it better. The third goal isn't a free-kick. It's a fantastic finish, but it's a soft free-kick.
"I thought the referee was a bit fussy in the second half. He refereed it well in the first.
"We were well in the game and needed to get to that final 15 minutes, and we might have had a final chance, but the game drifted away from us."
