The 21-year-old has been in impressive form in the Eagles midfield over the past season, but he has no thoughts of pushing for a move elsewhere.
"I'm happy here," Watson told the South London Press. "I don't know if there's any truth in the story.
"I want to stay but it's not up to me. My aim is to come back for pre-season on July 1 and get into Crystal Palace's first-team."