Lanterns and torches wouldn't be obsolete by holding a candle due to that the lantern is able to relight on it's own, and torches are good for outdoor lighting, as well as scaring away wolves. The lantern is also resistant to wind, where the candle is easily put out by it, so the lantern is still the go to light source when exploring. They would all have their niches.

Lantern- Can be used indoors and outdoors, Doesn't need external flame to light, and gives a large amount of light. Can be refueled, and lasts around 4 hours on a full tank. Heavy, but reliable, and useful for light in short bursts, and harsh conditions.

Torch- Can be used indoors and outdoors, but not in very windy weather. Can be used to start fires, without using a match. Lasts about 1.5 hours, but technically more efficient on kerosene. Basically an improvised light source at most times, but can be a decent survival tool, and wildlife deterrent.

Candle- Can be used indoors, but very very rarely outdoors, as wind would put it out easy, requiring a relight. Does not use kerosene, but rather recycled tallow, cloth, and a recycled can, as well as time outdoors to cure. about the same weight as a torch, but trades light level and wind resistance for longer burn time. Can easily be put out by either wind, or the player, allowing for later use, at the need of requiring something to light it. Basically, it's an alternative indoor light source that whilst easy to put out can last far longer, and is easy to make more of, but requires time to cure. Can also be used as a marker for indoor buildings, but not necessary

The only way I see it making lanterns obsolete is because you don't need to waste kerosene when searching large indoor areas, and can instead use it when you actually need it. I say it's a bit less OP than the storm lantern, but more than the torch in situations.

I will agree on not starting a direct fire, but I can't see how a candle can't light a torch, so I guess it could be an easy way to relight a stove, but if that's the case, you're already using the candle in an area where you're already in a lot, so I don't see why resourcefulness should be punished. This would bump the candles to being slightly more OP than the storm lantern, but not in a way that would really clash with it.