I doubt that it keeps wood from drying out much. It does seem to transfer heat well and evenly into the wood. When you cook bratwurst the same thing happens; the oil is the medium of heat transfer to the middle (learned that on Alton Brown).
It also does seem to prevent, or delay, charring. Scorching is good, charring is bad.
Heat the wood, apply oil to the hot wood, and it will drink it in.
