When you enter the forest for the second time, go to the corner with the torch. Take the torch and take it to your laundry room in your apartment. Use the oil found on the workbench inside there on the torch. When you return, you may light it when you approach the other torches pressing A. This is used to see down each well that happens to be in each corner of the map. Be cautious however -- if you use the torch to attack or unequip it, it will go out. This causes you to turn back to light it. Killing all of the enemies first and running from the man chasing you is recommended.