If a gamepad or joystick is attached Oblivion will automatically detect the device.
If you have a joystick connected, Oblivion will auto-detect it.
To keep this from occurring, you can either disconnect the Joystick before launching the game, or make the following change to the Oblivion.ini file: (the file is located in My Documents\My Games\Oblivion folder)
Open the Oblivion.ini file in Notepad, and find the line "bUse Joystick=1". Change that line to read "bUse Joystick= 0". Save the file and exit, and launch Oblivion.