From what I understand, the mercs around that year model are notorious for sounding a low oil alarm when the oil level is fine. Mine does the same. I have a 1991 50ELPTO. From the research I've done, the sensor inside the oil reservoir is very problematic. When the sensor fails, it sounds a constant, steady alarm.
The previous owner of mine simply disconnected the cables to the sensor. There are two light blue wires coming from the reservoir. There are inline bullet connectors between the reservoir and the control to the alarm. It's disconnected there. As a test, you might try disconnecting these wires to see if this is your problem. If it is, then you should consider changing that sensor. I don't like the fact mine is disconnected. It just is the way it is until I get mine fixed. I certainly don't recommend leaving it this way.
Either way, always eyeball your oil level as a precaution!
All that said, if anyone else has evidence to the contrary, please let me know. It's a problem I have too that I also want fixed. Unless I hear otherwise, I'll assume the information I have is correct.
