Step #1 In a 10- to 12-inch frying pan over medium-low heat, frequently stir onion in olive oil until very limp, about 10 mins.
Step #2 Add tomatoes, basil leaves, & bay leaf to pan.
Step #3 Reduce heat to low & cook, until tomatoes have disintegrated & most of the liquid has evaporated, stirring every once in awhile, about 30 mins.
Step #4 Let cool about 30 mins.
Step #5 Discard bay leaf.
Step #6 In a mixer or food processor/blender, sherry vinegar, extra-virgin olive oil, whirl tomato mixture, & cayenne until smooth.