Archiving old files from HDs to iCloud, but .. running out of disk space? Wah?!

I just upgraded my iCould account, and I'm trying to move old archive files, saved on hard drives to my iCloud account, but when I do this, I get an alert saying there's not enough disk space, and requesting me to manage my disk space. When I follow the link, it turns out that it's not the space in the iCloud, but the space on my internal drive that is running out .. but I'm not intending to save it to my internal drive. I already have the data on an external drive and I want it to go to iCloud what is happening?

is this some kind of default Apple-y process? Probably my ignorance but it doesn't make sense, I'd be grateful if someone can clarify this.