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Lubricants have specific base oils, additives and properties depending on their application. Some are designed to keep water in suspension (emulsify) while others shed water (demulsify).

Emulsification – Some systems are designed to filter water that’s been trapped in hydraulic oils. For example, tractors that have a common sump for hydraulics, transmissions, and brakes use tractor hydraulic fluid which emulsifies water.
Demulsification – When water gets into the hydraulic system of construction equipment, it’s most often because of condensation associated with temperature changes. Generally, the reservoirs on the hydraulic tanks have a water release valve which allows for draining the water at the bottom of the tank. Hydraulic oils typically demulsify water which allows it to separate out.