Ok I went to my Chilton manual to see how to go about replacing the knock sensor. In it it told me to drain my coolant because the knock sensor sits in a coolant passage and coolant will drain out when the knock sensor is removed. Well when I pulled the knock sensor out it had oil on the tip and a little oil came out of the hole. So I figured that it must sit in an oil passage. Any clarification would be appreciated. Thanks

That sounds more like your Oil sensor. Do you have the DIC? If not then its not the oil sensor.