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Must replace catalytic converter. What to do? V70-XC70

87 octane is fine, so long as you do not exceed 4,000 rpm under boost. You have a low pressure turbo that kicks in at 1200 rpm, which means that your compression gets above 11:1. The 87 octane burns hotter than 91 octane, which could have resulted in a burned valve. Using 'hotter' spark plugs can also contribute.

This should not be a problem with the NA engines as the compression ratio is constant.

Go for that O2 spacer in the rear. That will take the sensor out of the exhaust stream and get rid of your CEL. The front O2 sensor is the one that does all of the work anyway.
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Keeping it running is better than buying new






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