A water immersion objective is sometimes preferable over an oil immersion objective, because water is absolutely non fluorescent, and immersion oil always adds some background fluorescence, especially when used with short wave excitation. In addition, the water objectives are able to cope with the spherical distortion better than oil objectives, giving a better plain field image of the object. And what was most useful for us when using a scanning stage, is the fact that water viscosity is much lower that that of oil, so we had a lower risk of dragging the coverglass when the stage moved. I hope this answer is helpful. Kind regards, Harrie Verhoeven.
Besides the excellent points mentioned by Harrie above, there isn't necessarily a reason to NEVER use oil immersion. Oil immersion objectives usually have a higher NA and can have a tighter focus, so smaller excitation/observation volume which can be advantageous for FCS experiments.