Celtic moved a point ahead on Wednesday night with a 4-0 victory over Hearts at Tynecastle, but they have only taken one point from a possible nine at Parkhead.
Neil Lennon's team have dropped points after five of their 10 European games this season and will be involved in Europe after Christmas after some impressive Champions League wins, including their shock triumph over Barcelona.
They will qualify for the last 16 against Spartak Moscow on Tuesday if they better Benfica's result against Barcelona, and Coyle feels they will consolidate their position as SPL leaders when the European campaign breaks off for a couple of months.
With Rangers exiting the top flight this summer, the challenge to Celtic has been spread out with just three points separating the five teams below Lennon's men.
Former Bolton manager Coyle, who rejected the chance to manage Celtic in 2009, said: "It's looking very competitive. You have to balance that and recognise the biggest single player in that would be the distraction Celtic have in the CL. There is no getting away from that.
"I would expect in the coming weeks when the Spartak game is taken care of by Celtic, then for those couple of months before it comes around again I think we will see Celtic opening a gap up in the league.
"But it has brought a real competitive edge. I think we all accept Celtic will win the league but there are now six, seven or eight teams that feel they can finish second."
Coyle also expects Celtic, who host Arbroath in the William Hill Scottish Cup on Saturday, to finish the job against the Russians.
"I've been to Celtic's last three Champions League games and they have been outstanding performances," the former Dundee United and Motherwell striker said. "They are well set now to go, as we all hope and expect them to do, to beat Spartak and qualify for the last 16.
"That gives Scottish football a tremendous boost."