Why do pencils offer larger color variety than watercolor?
The answer is quite simple really: you can mix watercolours (and paints in general), whereas you can't easily mix coloured pencils.

For example: If I have two different blues - a light and a dark - and I want a blue that's halfway in between, with watercolours I can just take roughly equal quantities of each, mix them together and use that.

With pencils, I would have to apply both, and try and get the shading just right so that you end up with a medium blue rather than an uneven mess. Because this is more difficult, people prefer to have a wider range of colours, and so because there's a market for it, manufacturers sell this wider range.