Drop the oil pan and you are going to find out what is the problem

I wonder if you don't have an oil pick up problem. It looks like the way the oil sloshes is important. Do you have the level up to the full line? If not it might be interesting to fill it up to see if things improve, however, I agree that the pan has to come off, but if the problem is with the oil pick up, it might not be too expensive. I'm thinking the pump may be sucking air with the oil sloshed away from the oil pump, like if the pick up tube has come partially loose. This is just a WAG because I don't know what your pump arrangement looks like.

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'97 E 300 D

There have been new developments and I am afraid the prognosis is terminal. After confirming the bad oil reading, I pulled the old filter out of the box and gave it a close inspection under good light. Found chunks and fished them out with a skewer.

Photos below. Several similarly-shaped black pieces, non-ferrous, macro shot shows that they may not be metal.

More alarming is the shiny steel chunk of some cylindrical object, another bit of shrapnel, and a long curly metal shaving, all ferrous.

I don't know what they are but I know I will not run the engine again in this condition.

Attached Thumbnails

       

Sorry to hear the bad news. What's the largest size of the debris? Have you inspected the oil pan that it is not crushed?

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85 300D turbo pristine w 157k when purchased 167,870 July 2025
83 300 D turbo 297K runs great. SOLD!
83 240D 4 spd manual- parted out then junked

The parts are small; the corrugations on the cardboard are spaced about 5/16" apart.

How small? They had to be grounded through the oil pump gear teeth.

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85 300D turbo pristine w 157k when purchased 167,870 July 2025
83 300 D turbo 297K runs great. SOLD!
83 240D 4 spd manual- parted out then junked

The oil pan is not crushed. It does have a small leak near the front from a scrape that occurred years ago and had been repaired with epoxy, a fix that lasted for more than ten years before the epoxy finally broke loose, causing a slow but manageable leak. A new oil pan was at the top of my list of repairs until this latest incident, I had already located one used and made arrangements to have the work done.

Didn't use the macro for this shot...

The odd-shaped pieces are some sort of plastic or BakeliteŽ, very dark ruddy brown under close inspection.