There are test kits you can buy that will test oil (fuels) for water. Just look up diesel water test kits as some diesel owners will test pump fuel and or wvo/bio diesel before using it so that will take care of the question if there is water or not.

Now if it was for home heating...it will work just fine as diesel fuel for the most part as it wont be used motor oil. Diesel trucks can burn most oil type fuels..I have even seen them run on outside lamp oil.