Why Caterpillar 3516 hunting starting from 1000 RPM and higher?

There are several possible reasons of hunting:

1. Check fuel filters and water separators. If they get clogged engine cant get sufficient fuel supply at higher loads
2. Some injectors may fail. Fuel injectors cut-off test recommened to identify faulty one. Unfortunately service equipment required for this test. The other option is to replace full set if available.
3. Check/clean/replace RPM pickup sensors. Wrong RPM signal leads to misfare due to electronically controlled ignition of CAT engines. ECU limits load if misfiring detected
4. Check sensors and harness for damage, faulty insulation. In case +5V leaks through damaged insulation ECU may get false sensor data and limits load. There was a report from some AHTS that similar CAT engine got harness clamps damaged. Harness partially dropped and made contact with rotating shaft. Wires were not comletely tear by shaft but insulation get damaged. This caused current leak from sensors +5V circuit and engine hunted badly.