How to extract Oud oils from Oud Wood: The oud-based oil used in perfume is distilled from agarwood, oud is an antioxidant that is naturally formed and can become saturated with resin. The most common distillation methods are called hydro and steam distillation. The oud wood is chopped into pieces and then soaked in water, which readies it for the scented resins to be extracted.