Oil or black liquid implied to be oil is a liquid that appears throughout the series "Don't Hug Me I'm Scared".
Oil has appeared in some form in every single episode. In episode 1, Yellow Guy has a black liquid poured on his painting to remind him to slow down. Oil is also seen coming out of the mouse hole in the credits. In episode 2, the oil appears all over the puppets as they are withered away. It is seen coming out of Yellow Guy's mouth, under Red Guy's eyes, and Duck Guy is drenched in it. In episode 3, the oil appears in the Malcolm scene, when Malcolm appears to be rocks held together by oil. In episode 4, When Colin the Computer is irritated and screams at Red Guy to not touch him, oil appears under his chin. In episode 5, in the scene where the Duck Guy has his organs ripped out and eaten, it can be seen that his organs and the surrounding room are smeared in oil. In episode 6, the Lamp states that "you can have a dream about drowning in oil", and immediately after Yellow Guy appears to drown in oil. When Yellow Guy wakes up, his bed fills with oil which he once again drowns in.
At first, it was hard to tell what this liquid was, but since in Don't Hug Me I'm Scared 6, Yellow Guy drowns in the same black liquid after the Lamp mentions drowning in oil, it is likely that this liquid is oil. Additionally, every other occurrence of this black liquid is most likely oil as well.