Vettel acknowledged that Lotus and Ferrari, which led a session apiece on Friday, looked very strong at Sakhir.
He is confident Red Bull still has a very rapid package if it can pull a lap together.
"It is pretty close," said Vettel. "Obviously it's only free practice today.
"Ferrari was pretty strong today, Lotus as well, Mercedes - who knows? Maybe a little bit behind.
"But it will be very close tomorrow in qualifying and it matters a lot to work with the tyres around the track and the one who succeeds tomorrow will be on pole and the one who succeeds on Sunday will win the race."
Vettel said he had yet to show what the Red Bull could do over a single lap. He was fourth fastest in practice one and third in the second session.
"I wasn't really happy with the short runs I had today," said the champion.
"I seemed to struggle to put the lap together, I didn't make as much of the new tyre as I should have probably.
"In terms of long runs, I think I was happier."
Vettel believes that as long as Red Bull can get its car in harmony with the Pirelli tyres this weekend, it should be in competitive shape.
"The car is quick so we have to make sure we use that," he said.
"The speed of the car can only be shown on track if you translate it in the proper way to the tyres so we need to make sure that we get the maximum out of that, and then we should be on a good page."