Peanut (Arachis hypogaeaL.) has the potential to become a major source of biodiesel, but for market viability, peanut oil yields must increase. Oil yield in peanut is influenced by many different components, including oil concentration, seed mass, and mean oil produced per seed. All of these traits can potentially be improved through selection as long as there is sufficient genetic variation. To assess the variation for these traits, a diallel mating design was used to estimate general combining ability, specific combining ability, and heritability. General combining ability estimates were significant for oil concentration, weight of 50 sound mature kernels (50 SMK), and mean milligrams oil produced per SMK (OPS). Specific combining ability was significant for oil concentration. Reciprocal effects were detected for OPS. Narrow-sense heritability estimates were very high for oil concentration and 50 SMK and low for OPS. The low OPS heritability estimate was caused by the negative correlation between oil concentration and seed size. Consequently, oil concentration and seed mass alone can be improved through early generation selection, but large segregating populations from high oil crosses will be needed to identify progeny with elevated oil concentrations that maintain acceptable seed sizes.