In this work, local AFM oxidation technique in a controlled humidity environment has been used to create small features in strained SiGe alloys. When directly oxidizing SiGe alloys, minimum line widths of 20nm were achieved by adjusting parameters such as the bias voltage on the microscope tip and the tip writing speed. It was found that when bias voltage increases, and/or when the tip writing speed decreases, the oxidation height of silicon-germanium increases. In contrast to conventional thermal oxidation, the oxide height on SiGe alloys is slightly less than that on Si. Finally, this method was used to successfully cut conducting SiGe quantum well lines with high resolution.