Nunes has stopped training with Wolves, with ESPN reporting on Aug. 24 that City saw an opening offer for Nunes of £47 million ($59m) turned down — a figure sources said was way short of Wolves’ valuation of the midfielder.
The midfielder, who has 11 caps for Portugal, moved to the Molineux from Sporting Lisbon in August last year for a club-record fee of around €45m ($48.9m) on a five-year contract with an option of a further 12 months.
Defending champions City are looking to strengthen their midfield after injury to Kevin De Bruyne, who is sidelined for at least four months.
“He’s not with the group at the moment, his choice,” O’Neil told reporters after his side advanced to the third round of the EFL Cup following a 5-0 victory over League One club Blackpool.
“After the bid from Manchester City, he decided it was best for him to not to be with the group. Club policy and how we deal with things like that is set in place.
“As far as I’m aware, there’s been no improved bid. Matheus Nunes is still our player. We have a long contract still with him, and at this moment, I fully expect him to be here come Sept. 2.”
O’Neil said he is confident that they will find a solution.
“The next few days will be key of course and conversations will take place that will be private between me and Matheus,” he added.
Wolves next visit Crystal Palace in the Premier League on Sunday.