I discovered some tea tree oil I'd bought a long time ago and decided to make the most out of it and try to use up what was left. I had ONE pimple on my face that was already pretty dried up, not cystic, more of a white head, and dabbed some on that. Then I read that tea tree oil was good to put all over the skin, so I just rubbed a few drops into my whole face, went to bed and when I woke up, I had 12 new CYSTIC zits! I'm so confused! I thought tea tree was supposed to be good for the skin, not make me break out even worse! Not only are these pimples huge and obnoxious, they're painful as all hell. I don't even have to touch them for them to be painful 
I usually use rubbing alcohol at 50% to keep my acne under control and it works wonders so I'm gonna go back to that, but I still want to know why the tea tree oil gave me such a bad breakout?
I don't know the exact reason why, but it's likely either to do with the fact that pure tea tree oil is still an oil (and can cause blockage of as-yet unblocked pores?)orthe fact that it can dry out your skin and cause an overproduction of sebum if you don't dilute the oil first.
I've heard that you should not spread the pure oil on your face, and should instead dilute it first if you're going to be applying it over a large area. It does seem like some people have success with spot-treating with tea tree oil, though only on individual comedones.
I had a similar experience last summer where I spread undiluted tea tree oil over my face and woke up the next day with three painful cystic zits on my cheeks. ):
Tea tree oil needs to be diluted, but i still wouldnt put it all over. You most likely caused irritation resulting in the acne. That exact thing happened to me with apple cidar vinegar, but no amount of diluting helped (turns out im allergic to apples). This also happens to me when i use the aztec mask or any citrus on my face. The irritation caused cysts
Undiluted essential oils of any type should not be applied directly to the skin of the face, they are very concentrated. Each one is different and ones like lavender are considered safe. Tea tree oil is very strong and should be diluted.
These oils are in many products, but they are diluted. Even so, some people react to them so you have to be careful. Just because they are natural doesn't mean you will not react. Try diluting a few drops with about 20-40 drops of alcohol-free witch hazel. Apply once or twice a day with a cotton swab. Be sure to get alcohol-free witch hazel, or you'll dry out your skin too much, which will cause it to produce more oil.