A google search shows many people also asking this question about the tradition... where is the origin?

A 2004 article in the Cincinnati Post Click here
... It's said to have been started by Irish immigrants who had fled here during the potato famine in the mid-1800s. The immigrants had been accustomed to a Christmas Eve stew containing ling fish, which wasn't available here. John Gleeson, coordinator of the Irish Studies Program at the University of Wisconsin-Milwaukee, was quoted in a 2001 article in The Milwaukee Journal Sentinel as explaining that the Irish substituted oysters, the closest facsimile in taste.

...Probably because oyster stew is a warming dish, ideal for winter nights, the custom of serving it on Christmas Eve spread throughout the United States, beyond the Irish and Catholic communities.
Also from the Milwaukee Journal Sentinel is this information, contained in a 2002 article:
"According to Jerry Apps, University of Wisconsin-Madison professor emeritus and author of numerous books on Wisconsin history: 'By 1900, 50 different ethnic groups were here and each brought along its own costumes, recipes, approaches to the celebration. German celebrations always included, on Christmas Eve, oyster stew.'"
That tradition did not emanate from Germany, the waters there being too cold for oysters to dwell in them.