The 32-year-old Torres rejoined boyhood club Atletico in January 2015 on loan from AC Milan and is out of contract at the end of this season.
The former Chelsea and Liverpool forward is banned for the Champions League quarter-final return at home to Barcelona on Wednesday.
He scored early in the first leg but was then dismissed in the 35th minute of a match that Atletico went on to lose 2-1.
"Torres is doing a great job," Simeone told a news conference on the eve of Saturday's La Liga match at Espanyol.
"Tomorrow he will play and I'm sure in the next few days the club will announce its decision after speaking with him again."
Torres' goal against Barca was his fifth in 10 matches and he has scored seven times this season in all competitions. In February he netted his 100th for the club.
Second-placed Atletico are six points behind La Liga leaders Barca with seven games left but Simeone believes they are capable of catching Luis Enrique's side.
"We are hopeful we can compete until the end of the season and we have to just worry about ourselves," he said.
Simeone added he would pick a team for Espanyol without thinking about the return leg with Barca.
"There are four days between the games and time to recover," he said. "We haven’t decided our starting 11 yet but our priority without any doubt is tomorrow's game."
(Editing by Tony Jimenez)
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