Heat oil in a medium saucepan over medium. Add onion and garlic; cook until softened, stirring, about 3 minutes.
Add tomato paste, vinegar, sugar, mustard, and chili powder; stir until well mixed. Whisk in water; season to taste. Bring to a boil, whisking; lower to a simmer and cook until mixture has thickened to fully coat the back of a spoon, stirring occasionally, about 20 minutes. Refrigerate up to two weeks.