...therefore Pep Guardiola still needs Kyle Walker's services at least until next season.
Of course, but the problem is that Pep wouldn't need his services throughout the season, he will be picked specifically for certain games, just like what happened last season. I'm pretty sure Walker doesn't want that, he wants to move to a team in which he can start nearly every game, and he knows City can't give him that and this is why they are offering him just a one year contract. If kyle Walker leaves City, it is because he knows that his game-time at the Etihad would be quite limited next season.
I feel that it's not that Pep doesn't need his services, it's more like Kyle Walker wants a change now. It's natural when you have achieved everything for consecutive years, a player always wants a change. It was same with Gundogan and it's same with Kyle. Pep always is happy with his squad but if a player wants to leave then he also doesn't tries to convince the player to stay at City. With City there will always be lack of playing chances because they want the depth of good players in the squad and there will always be someone feeling left out if Pep doesn't plays him for 2-3 matches.