It sounds like you're reacting to the oil, unless you've done something else you're not saying. You might try slathering some bacitracin (antibiotic ointment) on your scrotum for the next week or so while the skin heals. Then I would lay off the oil. Try masturbating with a sexual lubricant such as Astroglide instead, or moisturizer or, when you're in the shower, conditioner. Use something that's already meant for skin.