The Saudis are obviosuly undercutting other producers by selling at close to, or at, a loss and by flooding the market. The main reasons for this is:
1) to bancrupt Iran or at least put substantial pressure on Iran's already challenged economy. The holy grail with regards to Iran is to get them to drop their nuclear weapons program once and for all and/or to spur a revolution from within (my wife is from Iran and for many years unrest has been growing domestically, while wages have gone up only a little prices for groceries and gas have trippeled. Unemployment is very high. Young people are living decadent lives with little hopes for the future. Well educated people are not working or if they are working are many times not getting paid. People are close to what they can take. There's a fire burning within Iran, news of this is not getting out much but those of us who know ordinary people living their ordinary lives there know this).
2) to in a similar fashion put severe pressure on Russia, who in a similar way as Iran is extremely dependent on their selling of oil and gas to sustain their economy including heavy military spending in recent years. Importantly, Russia is a firm supporter of Al-Assad in Syria, who is much hated by the Saudis. Remeber the basics of the Sunni-Shia conflict? The Wahhadities of Saudi Arabia are strong Sunni muslims, the Iranians are Shia and Al-Assad is a spin-off of Shia (Alawiti). The Saudi's want Al-Assad gone, they want to be the controlling power of the muslim world and they want the Shias gone.
The Saudis and the US are deeply allied, as they have been all the way back since king Saud the old came to power in Rhyad in the 30's. The intrests of the US and the Saudis have become som intertwined over the years that whatever happens you can be sure that they have made a deal behind closed doors before it happens.
The ideological battle between the sunni Saudis and the Shia of Syria, Iran and partly also Iraq connects to the fact that a lot of the untapped oil and especially gas rescources remaining in the Middle East are controlled largly but the shia countires mentioned above. In 2011, before the start of the war in Syria, the goverments of Iran, Syria and Iraq signed a deal to build a historically grand pipeline funnelling natural gas from the Iranian controlled Pars gas field (the world's third largest known NG reserve after Russia and mainland Iran) through Iraq in to Syria. It would be natural to assume that if Syria had not been thrown in to civil war this pipeline would have been built and Syria would have extended it to the mediterranean ports of Lebanon to open up trade with the huge EU market. Saudia arabia would not have this happen.
To me it's super clear that the Saudis conspired with the US to spark the civil war in Syria in 2011. In the same way it's clear that the price drop in oil is part of the same ongoing conflict but with oil price as a weapon, instead of jihadi warriors, bombs and terror.
And don't even get me started on how some US hawks have an extended view on this as a way for the US to indirectly undermine Chinas inevitable (IMO) climb towards being the global economical superpower of the 21 st century.
Please read this post before it gets moved to the political quarantine thread
(but can you really ever talk about oil without getting political?)