Fanning, 32, had to make the semis to accumulate sufficient points to take the crown before the season-ending event in Hawaii in December.
His nearest challenger, 11-time champion Kelly Slater, was eliminated in the second round at Peniche but can still take the title with a win at the Pipeline Masters.
But the American would need Fanning to again be beaten before the semifinals to overtake the Australian's points lead.
"It's a bit frustrating, obviously I just wanted to surf and unfortunately it didn't really happen," Fanning said of the lack of waves in his quarter final.
"I'm stoked that I made some points here, it puts me in a better position going into Pipe and I'm excited to go to Hawaii. I'll do the whole triple crown, so this could be fun."
The poor conditions left Slater frustrated earlier in the week as he bowed out equal 25th.
"I'm just having trouble being very inspired by the surf in the last three events. My performance probably shows that," he said at the time.AAP