The three highest bidders at last December's record-breaking sale of government oil from the Elk Hills petroleum reserve in California plan to cancel their contracts.

Phillips Petroleum, the highest bidder, has asked the Department of Energy to cancel its contract for 10,000 barrels a day as of May 7, a right Phillips has under the contract.

The company has been paying $39.62 a barrel for the crude, an $11.12 "bonus" over the $28.50 per barrel price posted in the area for private sales of crude.

Since the bidding last December for oil that would be made available for six months beginning in February, world oil prices have softened and similar quantities of oil are available at lower prices, industry sources said. s

Pacific Refining Co., which has been buying 20,000 barrels a day for an average price of $33.50, and Oasis Petroleum, buyer of 21,000 barrels a day at a $33.73 per barrel average, are also dropping their contracts.

Under terms of the sale, DOE officials said, the 51,000 barrels a day being relinquished can be offered to other successful bidders on a pro rata basis at the same price as they are paying for their present purchases of Elk Hills oil.

"We won't have any trouble selling the oil," one official said. "But there is no question that the market is softening."

DOE was embarrassedd by the outcome of the sale, which was the result of competitive bidding with a portion of the 127,465 barrels a day set aside for small refiners. At the time, it put the U.S. government in the position of selling oil for the highest "official" price in the world.

Even though competitive bidding was the cause, officials in some oil-exporting nations pointed to the Elk Hills prices as evidence of the true value of oil and cited it as justification of increases in their prices.

DOE officials argue the sale "had no impact on world prices" since so little oil is involved.They also point to the subsequent softening in world prices as indicating Elk Hills prices were hardly propping the cost of oil elsewhere.

Nevertheless, after the sale, DOE began an examination of the sale procedures to see if they could or should be changed, given the legal restrictions on disposal of the oil.

One possibility being explored is whether the oil should be swapped for other crude to fill the nation's strategic petroleum reserve. Purchases of oil for that purpose have been stopped because of tight world supplies and because of pressure from Saudi Arabia, which has indicated it might cut its output by 1 million barrels a day if the United States resumed filling the reserve.

"No final decision has been made about storing or swapping the Elk Hills oil," an official said yesterday. "That is part and parcel of the strategic storage question."

Recently, spot market prices for crude have fallen from more than $40 a barrel to as low as $33.50 delivered on the U.S. Gulf Coast. Meanwhile, many U.S. refiners have been cutting their refinery runs as inventories of gasoline hit record levels and, after a mild winter, stocks of heating oil also remain high.

Stocks of residual fuel oil, a very heavy refined product used by utilities and industry as a boiler fuel, are so plentiful that even Venezuela moved this week to cut its prices by up to $2 a barrel. Its new prices range from $20.30 to $32.25, depending upon sulfur content.

Exxon Corp. also announced price cuts of $1 to $3 a barrel for residual fuel oil.