When the Architect speaks to Neo in M2, he mentions that the Prime Program has to be "reinserted" after the One chooses the right door. This doesn't sound like something that the Prime Program can do itself - it sounds like some other program or machine is doing the inserting. What does this mean? It means that when the Merovingian lost his status of Prime Program, he literally could not continue to act as Prime Program. Contrast this to other exiles, who are still able to perform their functions once exiled into the Matrix.
So, as mentioned in Matrix System: Revision History and in the Merovingian page, the Oracle is the Merovingian's replacement for Prime Program, Trafficker of Information and protector of the Source. While the Oracle was able to take over the function of Prime Program (since she was the one "inserted"), the Oracle cannot take over the Merovingian's other duties until the Merovingian is actually deleted. Otherwise it would create a major system conflict. That is why the Merovingian continues to traffic information and protect the Source.
In ETM, the Keymaker says, “I have been held captive in a chateau in the mountains by an Exile named the Merovingian.” Since the Merovingian says to Neo, "I have survived your predecessors," this also suggests that the Merovingian has been an exile for a long time (several Matrix versions). A program becomes an exile when the system tries to delete it, and the system tries to delete the program when a) it breaks down (not the case for the Merovingian as he still traffics information and protects the Source just fine), or b) a better program is written (that would be the Oracle). The Merovingian has been in exile ever since the Oracle's model of choice was proven to work. This would be reason number one for why the Merovingian hates the Oracle: she is his replacement.
Both the Merovingian and Oracle use Matrix humans to process all information that is flowing through the Matrix at any given time. It would only make sense for the Oracle to take over trafficking of information since doing so is not anywhere near as intense of a duty as what she's already doing with all the information, namely calculating the future. And, the Oracle would do a better job at protecting the Source than the Merovingian since she can see further into the future.
The Merovingian has a lust for power, and to him, knowing "why" things happen is power. That is exactly what the Oracle's vision of human choice allows her to know. So, it only makes sense that the Merovingian hates the Oracle and is jealous of her ability to see the future. He covets the eyes of the Oracle. Even with all of the Merovingian's power, he still could not prevent the Oracle from getting the Keymaker back, and he could not forsee that Trinity would be able to get Neo out of Mobil Avenue without having to "trade" the eyes of the Oracle.
Another reason the Merovingian hates the Oracle is because Seraph (the exile program that protects the Oracle) used to protect the Merovingian instead. The Merovingian would naturally feel even more bitter toward the Oracle since he lost his best bodyguard to her, a bodyguard that has beaten Smith before and can stand his ground against Neo. This will be discussed in greater detail in the Seraph section.
From the Merovingian's point of view, every 100 years, he and the rest of the exiles have to unload themselves from the Matrix and build their empire of power from scratch. The Oracle's Matrix model of choice (the cycle of the One) is responsible for this, so the Merovingian probably anticipates this nuisance whenever the time approaches for the One to make his ultimate choice.
The Merovingian insults Morpheus, Trinity and Neo because they blindly followed the Oracle's "order" to get the Keymaker back even though they have no idea why they need him. I think the Merovingian knows why the One needs to return to the Source since the Merovingian monitors all information in the Matrix - this information would have to include the Prime Program's encapsulation of rejection into the One (see Matrix System: Prime Program). In other words, when the Oracle "sends" the rejection code into the One, the Merovingian is probably the program that routes the information correctly.
We also learn that the Merovingian owns Metacortex (the company Thomas Anderson works for at the beginning of M1) by reading the March 30, 2006 issue of The Sentinel (from The Matrix Online video game). This means the Merovingian knew who Neo was long before the movie began (probably the day Neo was born).
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