O'Neill puts a block on Davies loan to Celtic
Davies returned to action after five months out following shoulder surgery as a substitute during yesterday's FA Cup win over Brighton.
But O'Neill is not keen on allowing Davies to make a temporary switch to Parkhead.
He said: "I wouldn't be in a position to be wanting to loan players out at this stage.
"The reason being, of course, is that if you do it internationally between two countries - and Celtic and ourselves would be that - you'd have to do it for the whole of the season.
"While it would be great for some of the younger players to get maybe a month's football, we may well need Curtis. Things can happen here.
"A loan would be absolutely out of the question, especially for a season loan.
"I'm looking at trying to get some of the younger players games but I'm mindful of the fact that after 28 days we can get them recalled."