When drawing an image: System.Runtime.InteropServices.ExternalException: A generic error occurred in GDI

I've got a global Graphics object created from a Panel. At regular intervals an image is picked up from the disk and drawn into the panel using Graphics.DrawImage(). It works fine for a few iterations and then I'm getting the following helpful exception:

System.Runtime.InteropServices.ExternalException: A generic error occurred in GDI+.
at System.Drawing.Graphics.CheckErrorStatus(Int32 status)
at System.Drawing.Graphics.DrawImage(Image image, Int32 x, Int32 y)
at System.Drawing.Graphics.DrawImage(Image image, Point point)

I ruled out memory leaks as I dispose of the image object when I'm done with it. I know that the images are not corrupted and can be read fine as the program executes fine for a while before the panel stops showing.

I ran into the same problem when using a PictureBox but this time at least I got an error instead of nothing.

I checked the GDI objects and USER objects in the Task Manager but they're always around 65 user objects and 165 GDI objects when the app works and when it doesn't.

I do need to get to the bottom of this as soon as and it's not like I can stick breakpoints in .NET System libraries and see where exactly execution fails.

Thanks in advance.

EDIT: This is the display code:

private void DrawImage(Image image)
{
  Point leftCorner = new Point((this.Bounds.Width / 2) - (image.Width / 2), (this.Bounds.Height / 2) - (image.Height / 2));
  _graphics.DrawImage(image, leftCorner);
}

the image load code:

private void LoadImage(string filename, ref Image image)
{
  MemoryStream memoryStream = DecryptImageBinary(Settings.Default.ImagePath + filename, _cryptPassword);

  image = Image.FromStream(memoryStream);

  memoryStream.Close();
  memoryStream.Dispose();
  memoryStream = null;
}

_image is global and its reference is updated in LoadImage. They are passed as parameters as I want to