The 22-year-old has made 13 appearances for the Black Cats after temporarily swapping White Hart Lane for the Stadium of Light in August.
With Benoît Assou-Ekotto set to return to Spurs first-team in the coming weeks, O’Neill hopes André Villas-Boas will allow the England Under-21 international to remain at Sunderland.
“We have not spoken to Tottenham about it in any sort of formal way,” O’Neill said.
“I think Tottenham are happy he’s plying his trade here and I think Assou-Ekotto is coming into fitness now, so while they have the ability to recall him in January, they might feel they are well enough stocked now.
“Danny has improved immensely since he arrived and I think there’s a bit more to come as well. He’s got a bit of confidence now.
“When he first got here I think he was conscious of avoiding making too many mistakes. That was his focus.
“But he’s playing with a bit more freedom now. Initially he was happy just to give the ball to someone in front of him, but now he’s looking to make things happen himself and he’s doing very well.”
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