Mobil Oil Corp. President William P. Tavoulareas, choking with emotion at one point, took the stand yesterday in his $50 million libel suit against The Washington Post and categorically denied that he set up his son Peter in a London-based shipping management firm and later forced the ouster of the firm's senior partner.

In nearly six hours of testimony before a six-member federal court jury here, the 62-year-old Tavoulareas cited what he said were numerous factual errors in the Nov. 30 and Dec. 1, 1979, stories or statements that left the "impression there was something shady here.

"It was devastating," said Tavoulareas, describing the impact of the stories. "I was being accused of stealing from my company to help my son. It made my son look like a fool, an idiot."

Tavoulareas then became so emotional on the witness stand that his lawyer, John J. Walsh of New York, asked for a recess and U.S. District Judge Oliver Gasch stopped the proceeding for 20 minutes while the Mobil executive regained his composure.

Tavoulareas, who started at Mobil in 1947 as a $55-a-week accountant and now is paid more than $1.2 million annually as its president, later apologized "for my feelings before" and continued his testimony with sharp and pointed remarks about what he said were the inaccuracies in the stories written by Post reporter Patrick Tyler.

Asked to comment on separate points in the Nov. 30 story, he variously responded that one was "a damn lie," another "180 degrees wrong," another "untrue."

At one point, he noted that his son was 25, not 24 as the newspaper said he was in 1974, when many of the disputed events about the creation of the shipping firm, Atlas Maritime Co., occurred.

"I did not set up my son," the elder Tavoulareas emphatically stated as he began a close examination of about two-thirds of the 119 paragraphs in the two stories.

Tavoulareas earlier said that he had demanded a retraction of the stories from The Post, and pursued his libel suit when the newspaper refused. Both of the Tavoulareases have sued the newspaper, Tyler, executive editor Benjamin C. Bradlee, assistant managing editor Bob Woodward, who did some initial reporting on the Tavoulareas story in 1976 and later had a hand in editing Tyler's work, and special correspondent Sandy Golden, who led Tyler to one source for the Nov. 30 story.

The elder Tavoulareas said his integrity had never been questioned until The Post articles, the second of which quoted a letter from Rep. John D. Dingell (D-Mich.) to the Securities and Exchange Commission, saying that the Mobil chief may have given "false and misleading" statements to federal investigators who questioned him in 1977 about the Atlas arrangement.

Tyler testified last week that investigators for Dingell's subcommittee had given him various documents relating to the SEC's 1977 investigation of the Tavoulareases' business dealings and also a written summary of the investigators' December 1979 interview with one of Tyler's key sources for the Nov. 30 story, George Comnas, the shipping executive who headed Atlas for several months in 1975 before his ouster.

Tyler testified that he used the congressional investigators' notes of their meeting with Comnas to cross-check the version of the events that Comnas had confidentially given him. But Tyler said that under his agreement with the committee staff members, he could not mention Dingell's letter to the SEC until after the first Post story had appeared.

"Now if this isn't a set-up for The Washington Post," Tavoulareas said yesterday, "I don't know what is."

The elder Tavoulareas gave a lengthy account of his version of how the Atlas Maritime Co. was created, starting with a history of Mobil's long involvement in Saudi Arabia and his business dealings with Saudi businessmen and members of the Saudi royal family.

He said Mobil in 1974 helped create the Saudi Maritime Co. (Samarco) in conjunction with a Saudi merchant company and a member of the royal family in anticipation that the Saudi government was about to impose flag preference restrictions that would have given ships with a Saudi connection preference over those from other countries.

Atlas was created to manage Samarco's operations, Tavoulareas testified. The Mobil official said that he "could have been" the one who suggested that Comnas head the new firm.

But Tavoulareas consistently said that Comnas invited his son to join Atlas, and that he did not in any way pressure Comnas into hiring his son.

The Mobil president said he promptly informed Mobil board chairman Rawleigh Warner Jr. of his son's prospective involvement in Atlas and that Warner and other Mobil officials approved. Tavoulareas said he immediately divorced himself from any Mobil decision-making involving the oil firm's dealings with Atlas through Samarco.

Nonetheless, Tavoulareas said that he still felt free to "offer an opinion or get involved" in Atlas matters that related to Mobil.