O'Neill, who is also holding contract talks with Olof Mellberg and Luke Moore, admitted: "Stephen is another one I'd like to agree a new deal with.
"I'm in discussion with his agent about that at the moment and we hope we can do something."
O'Neill is weighing up whether to allow O'Halloran to go out on loan again.
He said: "Stephen would like to go out and play games. He had had the experience at Wycombe last season. Wilfred Bouma has been doing fine at left-back so that has denied Stephen an opportunity."