The world No 1 exited the last 16 of the World Open as he lost to Hossein Vafaei 5-4 in Yushan.
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Iranian Vafaei, 29, came from 63-37 down in the final frame, sealing the victory only on the last colour after O’Sullivan missed a routine black.
The Rocket, 48, is his own worst critic and rates his technique and execution over the past two years — since he was King of Sheffield — as only “four or five out of ten”.
To win a record eighth world crown this spring, O’Sullivan will engage in some friendly fire.
He said: “It wasn’t meant to be. A lot of stuff is fate.
“Usually 99 times out of 100, the better player usually wins. That’s how the match unfolds.
“He deserved his victory, he played better snooker. Disappointing I didn’t play well enough to win.
“I’m doing some exhibitions in Hong Kong. I’m coming back to China in May doing a tour.
“I’m trying to figure out why I’m not feeling good out there when I’m playing.
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“I’m winning, I’m competing but I’m not striking the ball well. I think I play better if I know I’m doing more exhibitions.
“I learn to relax in front of a crowd. It’s hard when you’re playing matches against very good players all the time. You’re competing for ranking points.
“I need to figure out a way to find my game again.”