This fluttering petrol gauge needle was an issue that afflicted our 1992 300E.
It was in existence when we bought it and we chose to tolerate it (it was a minor issue on the list with that car). The cause was the illumination rheostat - dimmer knob for the instrument cluster - as it also sounded crunchy and crackly when rotated. It is a common item in Europe. It only ever fluttered when under half a tank of fuel was left.