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It is often found in "pools" or squirting out of the ground in "wells" if a pool does not have a spout it is usually a relatively small pool. a spout of 5 blocks indicates a medium sized pool and one of 10-20 blocks high is large/massive reserve. these reserves can go deep underground as well.
Oil is commonly found in deserts and the water, easy to see as black patches interupt the blue sea, but can appear in any biome.
Oil has the same properties in water meaning it spreads down 7 blocks per ever 1 block if height, moves relatively fast, uses the water sound effects. It should be noted as it has the same properties as water it can oddly be used to irrigate crops, make cobblestone/obsidian when in contact with lava and even be used to put out fires. However oil sources cannot be created like water so it, like lava, is a limited resource.
to gather Oil a empty bucket is needed. once in the bucket it can be deposited down again or put in a machine.
You can also refine it into fuel.