Steuart Petroleum Co. has called off talks with Venezuela's state-owned oil company, Petroleos de Venezuela, which had been negotiating to buy 50 percent of the Washington petroleum distributor for $11 million.

Steuart's chairman, Leonard Steuart, said yesterday that the company has "indefinitely suspended" the negotiations, which had been underway for two years, in light of changes in the petroleum market.

However, Steuart noted that the company will continue its 35-year-old relationship with Venezuela, which supplies the firm with 25,000 to 30,000 barrels a day of refined petroleum product -- accounting for about 50 percent of the company's requirements.

"We will continue to look to Venezuela as one of our principal suppliers," Steuart said. But, he added, given the changing conditions of the market, the acquisition agreement "wasn't in our joint best interests." Steuart sold about $450 million of petroleum products last year in the Washington area and along the East Coast.

Under a letter of intent signed earlier this year, the Venezuelan company would have paid $11 million for a 50 percent share of Steuart. The agreement also called for Steuart to place 42,000 barrels a day of Venezuelan petroleum products through its distribution system.

While assuring a steady source of supply for Steuart, the agreement also would have guaranteed an overseas market for Venezuelan oil. Venezuela has been negotiating with several other distributors in the United States, including Citgo, a subsidiary of Southland Corp.

"When we began the negotiations in 1984, we felt then that it was good for the market that existed," Leonard Steuart said. "We had the marketing outlets and they had the production."

But today, he added, "There is plenty of product out there and it is no longer necessary to enter into an agreement with a refiner supplier."

In Caracas, a Petroleus official said, "We would be perfectly happy to go ahead with the negotiations, but they feel it is not the best moment for them to enter into an agreement," according to Washington Post special correspondent Tyler Bridges.

Bridges reported that Caracas analysts believe Steuart called off the deal largely because of a controversy that has erupted over Petroleos' plans to buy half of Citgo for $290 million.

Strong criticism by opposition political parties has led President Jaime Lusinchi to hold up that deal, and an investigation is pending on whether Venezuela paid too much. The investigation was prompted by comments of a Southland executive, John Thompson, who was quoted in a March New York Times article as saying the company was getting a "steal" of a deal, Bridges reported.

"Steuart is a closely held, family company and doesn't want to see its name plastered all over the newspapers," said Robert Bottome, a consultant in Caracas. "They saw what happened to Citgo."

Steuart said he had no comment on the reports out of Caracas.

The cancellation of the deal "doesn't affect Steuart Petroleum's business plans one whit," said Steuart, who noted that for the past seven or eight years, the company has been expanding its product line and geographic boundaries as well.

"We were primarily marketers of industrial heating oil," Steuart said. Today, the company continues to market industrial heating oil, and also sells home heating oil and is a wholesaler of gasoline products.