Looks more like foaming to me. It may have water but water contamination will not slow down the lift, unless something is frozen. Foaming is about sucking air, meaning not quite oil enough in the reservoir. Cold oil is more prone to cavitation, worsening the problem.
There is not a lot of storage capacity in the tank so running low on oil is very easy. Usually what happens is since you don't need the down force side of the cylinders eventually the pump scavenges up what it can from the down side to operate the lift side. Shut it off and some oil will pool back into the down side of the system. I've seen it happen.
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