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Coolant temp sensor is likely fine. 205F coolant temp is exactly why you are seeing the oil temps you are - as I previously suspected.
The M3 has a 79C thermostat = 174F. You're pushing 97C.
If you want to bring your oil temps down, you need to solve cooling system or airflow issues, and also ensure that the electronic fans are operating as designed.
Once your coolant temp is 79-85C, you'll see the needle nearly center.
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