Based on your posted information, I would bet that the engine rear main seal has failed, which is usually due to a clogged flame trap system.

$25 for the replacement seal part, many, many, hours of labor to replace. (You have to pull the transmission to get to it). If this is the case, don't feel bad, this has happened to a lot of people, who have not maintained the flame trap system.

And...before you replace the rear main seal, you need to trouble shoot the flame trap system, so that you don't blow out the new seal.

Art Benstein has a write up on his Web site: http://cleanflametrap.com/RMS.html
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If it needs to be maintained, repaired or replaced on a 1990 240, I've probably done it. '90 240DL, 350,038 miles, will she make it to 400K ?? >>You haven't really worked on a car until you draw blood<< :-}