The England Under 20 international is a highly rated young defender and Atletico feel that he could be a long term prospect at the Madrid club.
The 19-year-old is currently on his second spell of loan at Borussia Monchengladbach. He struggled early on to nail down a regular starting role, but is now making good progress.
The Bundesliga club offered £8 million to sign Oxford permanently, but their bid was rejected by West Ham with the club valuing the player at around £12 million.
David Moyes initially considered him as a potential first team player but decided to opt for more experience as West Ham were struggling badly at that time.
There is every possibility that Moyes will give him sufficient game time next season (provided he stays on) and the club will want to hold on to their top young talents.
Oxford is keen to play regularly and he favours a move to Spain if he leaves West Ham.