Drain the oysters over a bowl with a sieve and rinse under cold water to remove any sand or shell bits. Reserve the oyster juice. Roughly chop the oysters.
Place a paper towel over a mesh sieve to catch any sand and impurities and run the reserved oyster juice through the sieve into a clean bowl.
Heat a large pot over medium high heat.
Add bacon fat or butter.
Once the fat is melted and hot, add potatoes, celery and shallot. Cook for 2-3 minutes, stirring frequently.
Reduce heat to medium and add flour, old bay seasoning and salt. Cook, stirring constantly, until flour is nicely toasted, about 1 minute.
Slowly add reserved oyster juice, continuously stirring everything and scraping the fond (brown bits), built on the bottom of the pan. The mixture will get super thick, which is normal. If needed, add a little bit (1-2 tablespoons) of water to get all the brown bits scrapped off.
Then slowly pour in milk, while stirring everything constantly, to gradually incorporate everything.
Reduce heat to low/simmer, and slowly heat the soup up, about 10 minutes. (TIP: Don’t rush this step, because if you bring the soup to a boil, it’ll curdle, which won’t affect the flavor, but it’ll look unappetizing.)
Add oysters and cook for another 2-3 minutes.
Serve immediately with fresh parsley, hot sauce and soda crackers.
Store leftover oyster stew in an airtight container in the fridge for up 3 days, or freeze for up to 1 month. Thaw frozen oyster stew in the fridge overnight, and then reheat it slowly over low heat.