as a guy that's use the blue tipped wrench on lots of frozen fittings (just never an o2 sensor), I have to say that it matters where you apply the heat too.
Ideally, you would want to heat the item you want to expand, but also depends on if you want to work with it while it's hot or after it's cool. Just like water, steel expands when hot and contracts when cold.
For this idea, ignore the o2 sensor part for the moment. Consider a bolt in a threaded hole (nut).
If you heat up bolt but not the nut, the bolt will get even tighter as it heats up but will shrink when it cools. You should then be able to turn it out.
If you heat the nut but not the bolt, it will loosen around bolt as it heats up but will grip even more tightly as it cools. In this case you would need to turn out the bolt while the nut is still hot.
The concept is called 'upset'. If you heat up steel to the point where it wants to expand, but is restrained (like the hot bolt in the relatively cold nut), the steel will be unable to expand in diametre but will still shrink when it cools.
All that said, I have never tried it on o2 sensors specifically, but I know it holds true for other circumstances.