Cancelo has spent the last 18 months out on loan at Bayern Munich and then Barcelona after falling out with Pep Guardiola in January 2023.
Barcelona's financial issues have prevented them from making a move for the full-back, who they wanted to keep, and they are still unable to register new signing Dani Olmo despite allowing Ilkay Gundogan to rejoin City to free up some finances.
Guardiola insists he will welcome Cancelo back to City if he doesn't leave this week, and the Portuguese has been training with the first team at the Etihad campus.
He has been left out of matchday squads against United, Chelsea and Ipswich so remains out of Guardiola's plans for the time being.
With the deadline for an exit approaching, AI Hilal are working on a deal to sign Cancelo, 30, who still has three years left on his contract.
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