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.