A bottle of peanut oil, with Vitamin E added as a preservative. Peanut oil, also known as groundnut oil or arachis oil, is a mild-tasting vegetable oil derived from peanuts. The oil is available latter with a strong peanut flavor and aroma, analogous to sesame oil.eanut oil, as with other vegetable oils, can be used to make soap by the process of saponification. The oil is safe for use as a massage oil. Peanut researcher George Washington Carver marketed a peanut massage oil.