I think this is a new discovery, well it is for me.

My friend and I were messing around in the training room, when i wondered what the oil jar was for. Well, i thought
oil + fire = big boom

SO, we grabbed both jars, i threw the oil and hit a monster, then my friend threw the fire at the same creature. well, we definately made a big fire.

Unlike the normal fire jar, oil + fire makes a big "lake of fire" that burns anything that enters it. SO if your out on a mission, throw down some oil and a fire jar / potion to make a wall of fire. This helps you take out some annoying weak monsters.

Hope i helped