Place the onion and water in a food processor, and pulse for about 30 seconds, or until the mixture is slushy. Press through a fine mesh strainer into a large measuring cup. You should have ½ cup of liquid. Discard the solids.

Add the ketchup, molasses, vinegar, Worcestershire, mustard, liquid smoke, hot sauce and pepper to the onion water. Whisk until well combined.

Heat oil in a large saucepan set over medium heat. Once shimmering, add the garlic, chili powder, and cayenne and cook until fragrant, about 30 seconds. Stir in the liquid mixture and bring to a simmer. Reduce heat to medium-low and cook for 10 to 15 minutes, until the sauce has thickened slightly. Cool to room temperature before serving or storing. Sauce can be refrigerated, in an airtight container, for up to 1 week.