How to override observers in Magento 2?

I got it working with the help of preference itself. Here is the code which might be helpful to someone

di.xml

<?xml version="1.0"?>
<config xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:noNamespaceSchemaLocation="urn:magento:framework:ObjectManager/etc/config.xsd">
    <preference for="Magento\CatalogUrlRewrite\Observer\ProductProcessUrlRewriteSavingObserver" type="Aceturtle\ExcludeSimpleProductUrlRewrite\Observer\ProductProcessUrlRewriteSavingObserver" />
</config>

ProductProcessUrlRewriteSavingObserver.php

<?php

namespace Aceturtle\ExcludeSimpleProductUrlRewrite\Observer;

use Magento\Catalog\Model\Product;
use Magento\CatalogUrlRewrite\Model\ProductUrlRewriteGenerator;
use Magento\UrlRewrite\Model\UrlPersistInterface;
use Magento\UrlRewrite\Service\V1\Data\UrlRewrite;
use Magento\Framework\Event\ObserverInterface;

class ProductProcessUrlRewriteSavingObserver extends \Magento\CatalogUrlRewrite\Observer\ProductProcessUrlRewriteSavingObserver
{
    /**
     * @var ProductUrlRewriteGenerator
     */
    protected $productUrlRewriteGenerator;

    /**
     * @var UrlPersistInterface
     */
    protected $urlPersist;

    /**
     * @param ProductUrlRewriteGenerator $productUrlRewriteGenerator
     * @param UrlPersistInterface $urlPersist
     */
    public function __construct(
        ProductUrlRewriteGenerator $productUrlRewriteGenerator,
        UrlPersistInterface $urlPersist
    ) {
        $this->productUrlRewriteGenerator = $productUrlRewriteGenerator;
        $this->urlPersist = $urlPersist;
    }

    /**
     * Generate urls for UrlRewrite and save it in storage
     * @param \Magento\Framework\Event\Observer $observer
     * @return void
     */
    public function execute(\Magento\Framework\Event\Observer $observer)
    {
        /** @var Product $product */
        $product = $observer->getEvent()->getProduct();

        if ($product->dataHasChangedFor('url_key')
            || $product->getIsChangedCategories()
            || $product->getIsChangedWebsites()
            || $product->dataHasChangedFor('visibility')
        ) {
            if($product->getTypeId() == 'simple')
            {
                return;
            }


            $this->urlPersist->deleteByData([
                UrlRewrite::ENTITY_ID => $product->getId(),
                UrlRewrite::ENTITY_TYPE => ProductUrlRewriteGenerator::ENTITY_TYPE,
                UrlRewrite::REDIRECT_TYPE => 0,
                UrlRewrite::STORE_ID => $product->getStoreId()
            ]);

            if ($product->isVisibleInSiteVisibility()) {
                $this->urlPersist->replace($this->productUrlRewriteGenerator->generate($product));
            }
        }
    }
}

You are trying to set preference on observer, which is not the right way. You need to create an observer on event "catalog_product_save_after". It would be working fine. Remove your existing preference from di.xml and create event.xml in your module /etc folder with below code

<?xml version="1.0"?>
<config xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance" xsi:noNamespaceSchemaLocation="urn:magento:framework:Event/etc/events.xsd">
<event name="catalog_product_save_after">
    <observer name="your_process_url_rewrite_saving" instance="Aceturtle\ExcludeSimpleProductUrlRewrite\Observer\ProductProcessUrlRewriteSavingObserver"/>
</event>

Your observer file will remain same as you are using in above post:

<?php
namespace Aceturtle\ExcludeSimpleProductUrlRewrite\Observer;
.....
class ProductProcessUrlRewriteSavingObserver extends \Magento\CatalogUrlRewrite\Observer\ProductProcessUrlRewriteSavingObserver
{
....
public function execute(\Magento\Framework\Event\Observer $observer){
  if($product->getTypeId() == 'simple')
    {
      return;
    }
.....
} }