Hi
You have not specified clearly which internal reference clock that you would like to use - from the code I assume that it is IRC48M since this is enabled; IRC48MHz can be used as direct core clock source or as reference for PLL or FLL.
After a reset (any type) the MCG starts in FEI mode, meaning that the 32kHz IRC is being used as source for the FLL and the core is clocked at around 21MHz.
You can initialise and operate without any external oscillator.
The only time that an external crystal/oscillator is needed for the K65 is when you need to use HS USB PHY, in which case a 12MHz, 16MHz or 24MHz crystal/oscillator is required for its PLL to reference to.
Regards
Mark
P.S.
This is a strange command - it is setting all bits apart from the OSC_CR_ERCLKEN_MASK:
OSC_CR |= ~OSC_CR_ERCLKEN_MASK;