Trim the ends and tops off of the cipolline onions. Cook the onions in boiling water until just soft, about 5 minutes.
Drain immediately, and then peel them.
Heat the olive oil over medium low heat, and add the bay leaves. Cook for a minute, just until fragrant. Add the onions and continue cooking just until they are lightly browned, about 7 minutes.
Add in the vinegar, sugar, and salt and pepper. Continue cooking until they begin to caramelize, about 2 minutes.
Remove the bay leaves, and transfer the onions to a serving platter. Pour any juices over the top.