Canola oil won't mix with water. Ballistol and cutting oil both form an emulsion in water. Ballistol mixed with water looks like milk, so does cutting oil, hence the nickname "moose milk".
The idea is to dilute the oil with water so when the water dries, you are left with a thin but uniform amount of lube on the patch.
You could probably cut the canola oil with some sort of solvent like acetone and do the same thing, the acetone dissolves the oil and evaporates leaving a thin and uniform coating of oil.