Oil, particularly that containing fine perfumes, represents consecration and dedication. Chrism or Holy Oil is of the highest spiritual vibration. Initiates were anointed (literally, smeared with oil) to signify that they were especially blessed and oil will often have this significance in dreams.
Psychological / Emotional Perspective:
Psychologically, we may recognize that a situation can only be dealt with by removing the stress – ‘pour oil on troubled water’. Ointment was initially either oil- or grease-based, so today to dream of massage oil or ointment suggests caring and pampering.
Everyday Material Aspects:
It will depend on which type of oil is being used in the dream. Cooking oil, for instance, will often signify the removal of friction, or a way of combining different components, whereas engine oil will highlight our ability to keep things moving. As the world becomes more polluted by petroleum oil products, dreams of oil may suggest contamination rather than purity.
You might also like to consult the entries for Engine and Odour.