This activity cannot sustain.
There are so many things wrong in those few words, it's hard to know where to start...
The Saudis are not "losing money", they are simply making less than before, which is still a huge profit. At worst, they may have to sell off some foreign holdings while they adjust. They might also have to slow down purchases of foreign assets that won't pay off handsomely in the short or medium term -- and if that means they are not buying US debt, that's more likely to be trouble for us than them.
The Saudis have essentially decided they don't want to give up market share, and if they can ding Iran at the same time, great. Indeed, their "charade" consists essentially of "failing" to greatly decrease production, but instead they have put much effort into building their own plastics (etc.) industries. It appears they see more of a future in value added petro products, in the future, than in being a "gas station" like Russia. IMO, the Saudis are most likely correct.
Further, the Saudis really have no choice. As more and more production in the US and elsewhere comes on line, at a break even point somewhere in the $35 to $50 range, that "overcapacity" sets the upper limit on prices. If the Saudis cut production, and temporarily drive prices back up to, say, $80 / barrel, that only encourages the $50 producers all the more. The US has already surpassed Saudi production, and much more capacity (in the way of competition to OPEC) will come online in the US and elsewhere if prices are high.
No, it is not wrong, and you should study Opportunity Cost and Net Present Value. Your explanation is wanting, market share does not destroy other nations reserves, and if market share costs $500 million a day, then maybe it isn’t worth it.
They are pumping an additional one million barrels a day at half the price, to regain a market share that will vanish instantaneously when the price returns or technology lowers the lift cost. Oil is oil is oil, it is in the ground waiting to be taken, which technology is making cheaper and cheaper. They cannot fight that by losing $500 million a day. The NPV cost is too great for something they cannot eventually protect - oil is abundant and they should get used to it. Plastics will never compensate for it - since the price of virgin plastics is dropping all over the Earth!
The best explanation is to defund the Jihadists in Iran and Isis, and slow down Russia. Since the Saudi’s cannot make war, they will destroy their enemies ability to make war.