Premiere Pro 23.6 your system has run out of application memory

I am getting "your system has run out of application memory" after upgraded from Premiere Pro 22 to 23.6. Same project, never seem this issue until now. I did a search and saw many are having the same issue. I tried making a new project but still same result. So I don't think my project is corrupted. 

CPU: 2023 Macbook Pro M2 Pro
RAM: 16GB

Working HD: Sandisk E81 Extreme Pro Portable SSD 4TB connected via usbc
Video format: HAVC-HS 45M 4:2:0 10bit, and working on proxy 720p mp4
Workflow: 2 camera setup for interview. 1 main camera for brolls. Entire project is 1.56T and the project file is 130mb. I have more than 50 edits within the project. And i don't have plugins. I am connected to an external monitor via HDMI. 
Steps to reproduce: I would get the warning message mainly when I scrub through broll back and forth randomly on a sequence for 1-2 min with proxy turned on. The warning message will come quicker if I disable the proxy. After I close the warning message, it will pop up 2-3 times, then PP is able to work itself out and I could some how get back to work while just be careful not to scrub for too long. Lastly, I will get the warning when I export as well. First time, the export just hanged in the half way. Then I unpluged the HDMI, and it seemed the export got a bit quicker and I got the warning again 9s before complete. It hanged for a few mins and the export was complete afterward.