The controlled functionalization of graphitic materials, particularly through oxidation, has garnered significant attention due to its potential to modulate electronic, optoelectronic, and molecular transport properties. Despite extensive applications of oxidized graphitic materials, a detailed mechanistic understanding of the evolution of O clusters in graphitic materials, ultimately leading to carbon vacancies remains elusive. In this study, we use density functional theory to investigate the transformation of O clusters in graphene, revealing key energetics and reaction mechanisms. We reveal that for several O atom configuration, such as 9 or 12 atom configurations, circular clusters are energetically more favorable than linear chains. However, the predominant formation of linear chains is attributed to their simpler stepwise growth and substantial energy barriers (up to 1.6 eV) that hinders reorganization into the circular configuration. Elucidating carbon vacancy defect formation mechanisms, we propose and evaluate reaction pathways involving the migration of ether and epoxy groups toward the core of the cluster. Detailed analysis of the potential energy surface indicates that epoxy migration is a more feasible pathway for pore formation compared to ether migration, which faces structural impediments with migration barriers exceeding 2.0 eV in larger clusters. Overall, our findings offer mechanistic insight into the evolution of oxidized graphene into nanoporous structures, informing the design of controlled functionalization strategies for 2D materials.