Heat 2 tablespoons olive oil in a saucepan over medium-high heat. Add onion and garlic to the hot oil and saute, stirring frequently, for 2 minutes. Stir in diced tomatoes and their juice, tomato sauce, oregano, 1/2 teaspoon salt, and 1/4 teaspoon pepper until well blended. Bring sauce to a simmer and reduce heat to low. Let simmer while preparing meatballs.