"Obviously, despite a massive price slump, Saudi Arabia still remains firm on its goal of retaining or even gaining a market share rather than to focus on the price," Eugen Weinberg, head of commodity research at Commerzbank, explained to CNBC.
The official selling price (OSP) is determined on a monthly basis by Saudi Aramco, the state-owned oil company that produces and sells the kingdom's crude. Adjustments are common and are usually made on the basis of market conditions in the respective regions.
"An OSP differential cut to Europe and the US is yet another proof for the goal of squeezing out alternative producers and exporters, such as shale oil producers in the U.S. or African suppliers to Europe".
For customers in Asia, Saudi Aramco will sell its Arab Light grade for $1.40 a barrel less than the regional average – a 60 cent cut from the January discount. The differential is measured using the Oman / Dubai average price as a reference point.
A discount, albeit usually smaller, for US and European buyers is nothing unusual by historical standards, and has been attributed to the more competitive markets there, plus more access to alternative sources of crude oil.
Meanwhile, in an annual speech delivered on behalf of the king on Tuesday, Saudi Crown Prince Salman bin Abdulaziz Al-Saud said the latest developments in the oil markets were "not new" and that the government would deal with it on the basis of "wisdom and firm willpower", as it had "done in the past".
The latest data from the Joint Organisations Data Initiative from late December showed Saudi Arabia exported 6.9 million barrels per day (bpd) in October, some 10 percent less compared to a year earlier.