If the oil is coming out of the air dryer discharge port, that oil is coming from the compressor .
The compressor may be going bad, as they have piston rings in them.
Another thing to check is the compressor intake. Some have filters and others hook into the engine air intake. If either is restricted, the compressor will pull oil past the rings.
Last but common, is that the compressor is cycling constantly, due to a leak in the small line, between the governer unloader port and the air dryer, unloader valve.
If the air dryer blows off every few minutes, while sitting still, there is a leak.
The air dryer should not blow off, unless you run the air down to 90 lbs or so and then only once it gets back to 120 lbs .