Mollema's placing moved the Trek-Segafredo rider into fifth place overall, tied on time with Kwiatkowski, and has him well placed to challenge for the overall title.
"It was a pretty hard day all day, up and down, a lot of steep climbs. We started the last climb with a large peloton, but we were in good position with the team. It was a strange climb, it was quite flat," said Mollema, who makes his debut at the Portuguese stage race in 2018.
Analysing the final of the stage and his chance of the stage win, Mollema explained there was little more he could have done.
"In the last K there were still 20 guys together, there were a lot of attacks, but it's hard to make a difference on this climb," he said. "I saw the videos from last year, so I did not put too much energy into attacking and BMC and Sky still had a lot of guys there, so I just waited for the last kilometer.
"In the sprint, Kwiatkowski had a fast acceleration and in the last 50 meters I was able to come around Dan Martin and I passed Geraint Thomas on the line. I think second was the best that I could do today.
Eighth on his season debut at the Trofeo Serra de Tramuntana and tenth a day later in the Trofeo Lloseta-Andratx, Mollema's result in the Algarve continues his promising start to the season. A year in which he is Trek-Segafredo's main general classification rider.
Stage 3's 20.3-kilometre time trial around Lagoa is set to shake up the general classification and force the first major selections in the general classification. Speaking to Cyclingnews on stage 1 of the race, Mollema added he is confident his skills against the clock has reached a new level for this season.
"I've worked on my position a lot. We made some big changes to my position the winter before. I went lower with the bars, but in 2017 I didn't really good feelings. I also felt that with the power I had I should have done better in time trials," he told Cyclingnews. "I've also spent lots of time training in this new position, so I think last week I did more than eight hours on the TT bike."
While Trek-Segafredo are aiming for a top result against the clock with Mollema, chrono specialists Matthias Brändle and Ryan Mullen will both be targeting a stage win success.