That line runs through the cooling system on its way to the other side of the block. It seems that it's developed a leak, and the coolant and oil will be mixing. Don't run it again until you get this sorted out! It's difficult, but not impossible to replace that line, but the old one has to be cut out, or at least one solder joint needs to be melted away. Several of the obsolete parts vendors who advertise here have kits to do the oil line replacement, with instructions on how to do it right.
Jerry
