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Investment in the world’s oil and gas fields tumbled in 2015 and 2016 in the longest period of retrenchment in energy spending in almost half a century, the International Energy Agency said.

Oil- and gas-field spending fell 25% in 2015 to $583 billion and is set to drop by a further 24% to about $450 billion in 2016, said the IEA, a Paris-based group that advises developed nations on energy policy.

“It may well be the case that investment will fall in 2017,” Fatih Birol, the IEA’s executive director, said in an interview. “We have never seen [a three-year decline] in history,” he said.

Energy-industry spending is among the most visible casualties of the oil-market slump over the past two years, with prices falling as low as less than $30 a barrel this year from 2014’s peak of over $114. On Tuesday, U.S. oil fell $1.39, or 3%, to $44.90 a barrel.

The pullback in funding has delayed new oil projects, led to tens of thousands of layoffs and decimated the profits of energy companies that were once reliable cash machines.

Overall, tightening spending across the board could lead to a new bout of volatility in oil prices. Some analysts have warned that lower investment in the future could lead to falling production and a price spike.

“This huge drop is not good news for the stability of the oil market,” Mr. Birol said.

The biggest losers have been debt-laden U.S. operators in the shale-oil industry, where investments fell 52% in the past two years, the IEA said.

The number of operating rigs in the U.S. fell to 450 in May 2016, the lowest level recorded and down 80% from 2012, the IEA said.

Even with the American investment cuts, U.S. production has surprised many with its resilience, falling less and not as fast as once predicted by rivals such as the Organization of the Petroleum Exporting Countries.

The oil market remains oversupplied, the IEA said in a separate monthly report on Tuesday and will be through next year.

The spending cuts didn’t hit countries with large state-funded oil sectors as hard. Saudi Arabia and Russia kept robust spending, the IEA said, as those countries have oil resources that are relatively cheap to extract. In some cases, it costs less than $10 a barrel to pump a barrel of oil there.

As a result, state-owned oil companies reached an all-time high of 44% of global investments in oil-and-gas exploration and production, the IEA said.

“The number of active rigs has not substantially changed over the last couple of years” in Saudi Arabia, Kuwait, the United Arab Emirates and other Middle East producers, the agency said.

These countries took advantage of lower prices to renegotiate contracts with service companies and squeeze savings out of them.

Meanwhile, Russia was able to attract Chinese and Indian investments as the collapse of its currency made it cheaper to invest in its fields. Russia has pumped almost 11 million barrels a day of crude oil this year, the most in the world and a historically high level.

“Capital spending even increased in ruble terms, helping to stabilize Russian production at a post-Soviet high,” the IEA said.

The conclusions of the report could add fuel to a debate among those in OPEC—the 14-nation cartel that controls over a third of the world’s oil supply—who say any move to cut production would simply benefit competitors like the U.S.

Production cuts were once OPEC’s main tool for controlling prices, but the American oil boom made it less effective. Saudi Arabia in particular has expressed skepticism over a possible production cap to be debated in Algiers later this month.

But others members like Nigeria have expressed support for such an option. The IEA said the West African nation has faced severe investment cuts following the deferment of several expensive deepwater projects on which they relied for future production growth.

By Benoit Faucon

Source: Wall Street Journal