Heat oil in a skillet over medium heat.
Add sliced onion; cook and stir until onion has softened and turned translucent, about 5 minutes.
Stir in hot sauce, yellow mustard, sugar, chili powder, salt, black pepper, and cayenne pepper.
Reduce heat to medium-low, and continue to cook for about 5 minutes.
Stir in water and tomato paste; simmer until liquid has reduced, about 20 minutes.
