The 29-year-old joined the La Liga champions on loan from Man City last summer, and he has been a vital player for Xavi's side this season, making 32 appearances, scoring four goals and registering four assists.
Barcelona want to keep hold of the right-back beyond the end of the campaign, but the club's financial problems will make it difficult for them to sign him on a permanent basis.
According to Sport, the Catalan giants want to agree another loan deal with Man City for the 2024-25 campaign, with a permanent transfer then potentially going through in the summer of 2025, when the club are expecting to be in a stronger financial position.
The report, though, claims that Man City are keen to sell Cancelo this summer, and there is serious interest from Saudi Arabia in the Portuguese.
Al-Hilal are believed to be interested in the defender, and Barcelona would not be able to compete with the Saudi Pro League outfit from a financial point of view when it comes to a transfer fee.
Man City are said to value the right-back at €50m (£42.8m), as he still has another three years left to run on his contract at the Etihad Stadium.
Cancelo has scored twice and registered three assists in 24 La Liga appearances this season, while he has also netted twice and provided one assist in eight Champions League outings.
The Portuguese was brought to Barcelona to play right-back, but he has recently been operating at left-back due to Alejandro Balde's season-ending hamstring problem.
Cancelo missed out against Atletico Madrid before the international break due to concerns
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