The Clarets suffered their eighth defeat in nine away matches at the Etihad Stadium as the home side managed to record a 2-1 victory despite being reduced to 10 men around the half-hour mark.
Dyche's side failed to capitalise on their one man advantage and the Turf Moor chiefs admits he was frustrated not to take anything from their first match of 2017.
However, Dyche also feels the quality City were able to introduce from the bench made a big difference, Pep Guardiola bringing on David Silva and Sergio Aguero at half-time.
"I think it is a missed opportunity in the sense you're playing against 10 men, on the other hand, you look at the quality they brought on at half-time, and that still gives them an opportunity to win the game," said Dyche.
"I actually thought we did better 11 v 11. I thought our tactics early on, and the way we shut them down from playing out was very good.
"We were going well, then the 10 weirdly disrupted us a bit, which we’ve seen many times."