Just went through this with my 95 e320 (104 992 engine) Don't know if this applies to your vehicle

The following from All Data:

Turn key in steering lock to position 2 (battery voltage).
Unplug electrical connection from oil pressure gauge sensor. Specified reading: 3 bar. If specified reading is not achieved: test cable from oil pressure gauge sensor to instrument for short to ground.
Cable in order: replace instrument.
With engine off, oil pressure gauge rises. Connect cable from oil pressure gauge sensor to ground. If reading is 0 bar, replace oil pressure gauge sensor . If reading remains at 3 bar cable has open circuit.

The oil pressure gauge is controlled electrically. The oil pressure gauge sensor installed in the oil filter attachment controls the gauge in the instrument cluster. There will be a positive reading at the oil pressure gauge in the instrument cluster when the ignition is switched on. Negative is applied to the oil pressure gauge through the sensor. As the pressure rises, the ohmic resistance of the oil pressure gauge sensor increases and the reading of the gauge alters.

You have to crawl under the car to get to the oil pressure sending unit. It is located on the lower back of the oil filter housing kind of above the starter. Fastlane parts has a nice picture of what it looks like.

By the way, the wire that connects to the sending unit is not part of the engine wiring harness. I had to replace mine because the insulation was completely decayed.