LONDON -- Oil prices sagged in early trading here on Wednesday following weekly estimates of U.S. stock levels and fence mending by the United States over a leaked briefing to the Pentagon about oil giant Saudi Arabia, AFP reported.

A barrel of Brent North Sea crude for September delivery eased to 25.23 dollars a barrel from 25.53 dollars on Tuesday evening. In New York, the light sweet crude September contract won 59 cents to 27.17 dollars a barrel on Tuesday, bolstered by a surge in U.S. share prices and a report that a briefing to a Pentagon defense panel had described Saudi Arabia as a "Kernel of Evil."

"September Brent has retraced lower on profit-taking this morning but I think that's partly due to the Pentagon distancing themselves from the leaked briefing," said broker Christopher Bellew at Prudential Bache.

U.S. Defense Secretary Donald Rumsfeld backed away Tuesday from the July 10 briefing by a Rand corporation analyst as reported by the** Washington Post.** "It did not represent the views of the government, it did not represent the views of the defense policy board," Rumsfeld said.

He said the account of the briefing had left a "harmful" misimpression, though he did acknowledge U.S. differences with Saudi Arabia.

Dealers said that the latest snapshot of U.S. oil inventories had also been mildly negative for prices.

U.S. crude oil stocks, measured by the private American Petroleum Institute, fell by 3.9 million barrels to 305.1 million in the week to August 2 from the previous week, said traders.

Gasoline stocks rose 194,000 barrels to 212.8 million, while distillate fuel stocks rose 1.7 million barrels to 134.5 million in the week to June 14.

"Although crude showed a draw, any positive sentiment was offset by the rise in distillates and gasoline," said Bellew, noting that gasoline demand had bolstered prices in recent weeks.

Traders were also awaiting a response from oil producer Iraq to UN Secretary General Kofi Annan's request Tuesday that Baghdad confirm it will agree to the UN Security Council's terms on disarmament and weapons inspections before a United Nations official accepts an Iraqi invitation to visit.

Iraq sent a letter last week inviting Chief UN Weapons Inspector Hans Blix to Baghdad for talks on the possible resumption of weapons inspections, which were interrupted in 1998.

With the White House having dismissed outright the invitation, traders remain wary that U.S.-led military action against Iraq could destabilize the Middle East and lead to a disruption of Gulf oil supplies.