Water vapor in VW Beetle oil cap?

[Bluebird]

I have a 1972 Super Beetle. I rebuilt the engine in 1995, it now has 123+K miles. I am finding water vapor inside the oil fill cap. Where is this coming from? It is appearing daily within 50-miles of driving. The #4 exhaust valve has dropped somewhat, (all other valves are fine). I have to adjust valves at under 2K mile intervals. Yes, just changed the oil, same issue. What kind of damage will this water vapor cause



Patrick.

 

[champspa]

Oil is absorbing water and the engine is letting it out when it gets hot enough . it happens all the time . make sure your pvc valve is working correctly , it may not be pulling the vapors off.