O'Neill told Sky Sports News: "We were terrific first half and really into it. At half time I thought we could go on and win the game. Their goal came out of the blue and set us back but we came roaring back. We could have got the result.
"I am disappointed but I am proud of the team. It was a really tough game for them. We were tough, strong and also played. The important thing is that we are not out of it.
"It will be tough against Moldova but we must win the last two. We have a chance. Even if we had drawn here tonight we would still probably have had to win the last two. We are capable of that."
The Republic must beat Moldova in Dublin on October 6 and defeat Wales in Cardiff three days later to snatch second place, though that could still leave them with the lowest points tally out of any of the second-placed teams in the nine qualifying groups.