Diao joined Liverpool a mere four years ago in a £5m move from Sedan and has been a Reds regular for the past few seasons. However, Diao was on loan with Portsmouth last season and a series of new signings by Liverpool manager Rafael Benitez has meant that he has been forced out of the squad.
The rumour has been doing the rounds for the past few days, and while some will criticise Tony Pulis for loaning players again, it must be remembered that players such as John Halls and Ade Akinbiyi once started out on loan before making their moves permanent.
Diao has four goals for his national side, Senegal, and has appeared for them 39 times.