what needs to be remembered is that you can use a solvent to clean the disc but it won't work with the pads. bake the pads in an oven for 30 min at 200 celsius and that should burn off the oil.
In general the problem sounds to me like oil on the brake surface and as mentioned before just cleaning won't work.
bleeding could be a good idea as well but it won't solve the problem.
is the brake still "hard" or has it squished or become softer?