I did do quite a bit of honing with oil on my coti at one point. i think it achieves the same result as the vaunted "soap" method for the same reasons, in that it slows down or mitigates the abrasive properties of the stone.
At the time, I was able to get some very keen edges, especially since i as struggling at the time to max out the stone.
What put me onto it was that I was using a vintage stone that left such mellow edges that I just couldn't get a good shave from them. Even had Gary Haywood do a blade on it for me and still didn't enjoy the shave from it. Only by using oil on it was I ever able to achieve an edge that was to my tastes from that particular stone.
I did start to notice that the edges were creeping into the "too sharp" range for my skin type, so I've since gone away from it. I'd heartily, without reservation, recommend it, especially for anyone that isn't getting the most from their stone.
Now that I'm thinking of it, my shaving technique has ratcheted up a notch, so I may be able to tolerate an edge sharper than what I've grown used to. i should try it again.
"Nothing is as it seems... Neither is it any different" -Neal Stephanson