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Heat oil in a 10-inch skillet over medium heat. Add onions. Cook, tossing occasionally, until beginning to brown, about 5 minutes.
Sprinkle with sugar; season with salt and pepper. Add 2/3 cup water and thyme; cook, stirring occasionally, until onions are tender and liquid has evaporated, about 20 minutes.
2 teaspoons olive oil
1 pound frozen pearl onions, thawed and patted dry
2 teaspoons sugar
Coarse salt and ground pepper
1 ½ teaspoons fresh thyme (or ¼ teaspoon dried)