以下の書き方ではエラーが出るので
var fs = require('fs');
var stream = cloudinary.uploader.upload_stream(function(result) { console.log(result); });
var file_reader = fs.createReadStream('my_picture.jpg', {encoding: 'binary'}).on('data', stream.write).on('end', stream.end);
以下のように書き換える
var fs = require('fs');
var stream = cloudinary.uploader.upload_stream(function(result) { console.log(result); });
var file_reader = fs.createReadStream('my_picture.jpg').pipe(stream);
参考元
https://github.com/cloudinary/cloudinary_npm/commit/bd590a19601d0d938a5083064f98536f1a0d0cf0