168.63.129.16 is the IP address of Azure DNS which hosts Azure Private DNS zones. It is only accessible from within a VNet which is why we need to forward on-prem DNS requests to the VM running DNS in the VNet. The VM will then forward the request to Azure DNS for the IP of the storage account private endpoint.
Reference:
https://docs.microsoft.com/en-us/azure/storage/common/storage-private-endpoints