95% of the time, the oil guage is normal, but had noticed it had gone way down, stepped on gas, it will go back to normal. The oil light went on twince since oil change, but it went on for no more than 10 sec, then it went away. No noticeable oil leaks from the engine, just a tinny bit from the rear main seal. No white smoke or blue smoke.
What is wrong with the engine? Does it mean it is time for rebuild?
It is a 97 LC
I my experience, the 1FZ is a big motor, with a lot of oil surface area, so how/when the oil is checked makes a big difference in the measurement. I always check it after being driven to operating temp, turned off parked relatively level and allowed to set for a few minutes. If allowed to set overnight the measurement will be different, depending on filter size, etc, the difference is pretty big. Depending on how they checked the fill, it may never have been full.
When changing oil, my fill method is, pour in 2 gal and drive, after warm, check and top off. My last change was before Cruise Moab, ~6500mi ago, just checked it and it's maybe a cup low, ~1/8" from full on the stick.
If your running thinner viscosity than ideal for your conditions expect higher consumption. For my conditions, any oil change will see 120F+ during it's life, so I select viscosity by the lowest temp that the motor will be started, in my case the chances of it being started in less than 20F are about zero, so I run Mobil One 15W-50.
The oil recommended by Toyota in the USA is distorted by politics, I prefer to use the foreign recommendation. The “for everybody else but USA” Toyota recommended oil chart;
AU viscosity chart
1FZFE motor
20w50 oil- -7C deg to 38C plus ; 19F to 100F plus
15w40 oil -10C deg to 38C plus; 14F to 100F plus
10w30 oil -18C to +38C deg; 0F to100F
5w30 oil -30C to 8C deg; -22F to 46F
For most US climates something in the 0W-40 to 10W-40 range would probably work best? I wouldn't make a motor condition decision based on one low oil event.
Even among 1FZ's some motors are happier with one oil, others prefer another. Both of my brother's rigs have run Rotella syn 5W-40 with good results, mine has a start up chain rattle and higher consumption on it, prefers the Mobil One. For your next oil change, try another brand/viscosity and find what your rig prefers.