Hello,
This is strange, aren't you triggering a resonance in the bay, because the period seems rather large, it does not look like numerical oscillations (unless you see SPATIAL oscillations of the free surface at a given time step).
Anyway I would choose to have a rough regime for the bottom (TURBULENCE MODEL FOR THE BOTTOM = 2). This name has been changed into TURBULENCE REGIME FOR THE BOTTOM in the enxt version because it is misleading.
Otherwise I do not think that k-epsilon can be very effective in a large bay with large elements, you can try also a constant coefficient on the horizontal, with coefficient at least 1 in your case, and a mixing-length on the vertical.
As the elements are smaller in the inner bay, looking at the effect of the time-step (a larger or smaller) would also give a hint.
With best regards,
Jean-Michel Hervouet