To gain full control over the growth of carbon nanotubes (CNTs) using plasma-enhanced chemical vapor deposition (PECVD), a thorough understanding of the underlying plasma-catalyst mechanisms is required. Oxygen-containing species are often used as or added to the growth precursor gas, but these species also yield various radicals and ions, which may simultaneously etch the CNT during the growth. At present, the effect of these reactive species on the growth onset has not yet been thoroughly investigated. We here report on the etching mechanism of incipient CNT structures from OH and O radicals as derived from combined (reactive) molecular dynamics (MD) and force-bias Monte Carlo (tfMC) simulations. Our results indicate that the oxygen-containing radicals initiate a dissociation process. In particular, we show how the oxygen species weaken the interaction between the CNT and the nanocluster. As a result of this weakened interaction, the CNT closes off and dissociates from the cluster in the form of a fullerene. Beyond the specific systems studied in this work, these results are generically important in the context of PECVD-based growth of CNTs using oxygen-containing precursors.