The 65-year-old ??? victorious six times in senior majors having also claimed eight such titles on the regular tour ??? impressed in searing temperatures in California to move ahead of the chasing pack.
Twice US Open champion Lee Janzen and former Senior PGA Championship holder Michael Allen are in a pack of six players who sit a stroke adrift of Watson.
American quartet Woody Austin, Jim Carter, Jeff Hart and PH Morgan are the other four directly behind the five-time Open winner.
Defending champion Colin Montgomerie, who won in a play-off last year at Edmond in Oklahoma, is another shot behind.
The Sky Sports golf pundit posted a two-under 68 and currently ties for eighth with Englishman Barry Lane, Kiyoshi Murota and Kevin Sutherland.
Montgomerie was playing in a marquee pairing with Bernhard Langer, with the pair claiming six of the last seven senior major titles.
Langer came into the tournament in arguably better form after he won the Senior Players Championship earlier this month to collect his fifth career senior major.
Montgomerie has stolen a march on him, however, after the German carded a one-over 71 to sit five shots off the pace.
The 52-year-old Scot will hope for a more consistent second round after he blighted the five birdies he recorded with three bogeys.
Englishmen Philip Golding and Paul Wesselingh are in contention after one-under 69s while Wales??? Ian Woosnam is level-par.