I have read that lavender oil is safe for babies older than three months old. I found this article very useful in learning about using essential oil on babies: http://www.thehippyhomemaker.com/essential-oil-safety-babies-children/ In general, according to the article, it is best not to use any essential oils on babies under three months, and to always dilute the oil before using it. The article listed the different oils that are suitable for babies of different ages.
I have a friend who uses essential oils on her kids and swears by it. Here's an article that has a generally guideline on which essential oil is okay for the different ages. http://m.wikihow.com/Know-Which-Essential-Oils-Are-Safe-for-Babies The brand that my friend uses is called Young Living. I'm not too sure how much is it as I've not purchased it before but according to her, you'll only use 1-2 drops at a time so it can last pretty long.
I think it'll be safer to dilute the oils before application whether newborn or not. Just to make sure there's minimal reaction. I would also apply it to the pillow rather than directly on the skin. http://sg.theasianparent.com/essential-oils-for-healing-and-soothing/
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thanks